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Does Yelp Deserve Your Investment?

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May. 7 2018, Updated 6:33 a.m. ET

A look at Yelp’s enterprise value and related multiples

Yelp (YELP) boasted an enterprise value (or EV) of $2.9 billion in 2017. Peer companies PayPal (PYPL), eBay (EBAY), Yandex (YNDX), and Square (SQ) have EVs of ~$85.5 billion, ~$42.0 billion, ~$10.2 billion, and ~$18.8 billion, respectively.

How does Yelp’s EV compare to its adjusted EBITDA (adjusted earnings before interest, tax, depreciation, and amortization) for the last 12 months? The company’s EV-to-adjusted EBITDA for the trailing 12 months is 51.5x. In 2018, its EV-to-EBITDA is expected to be 15.8x. Yelp’s EBITDA margin for 2017 was 7%.

A closer look at the company’s EV ratios shows that its EV-to-sales ratio for the trailing 12 months is 3.4x, and its anticipated EV-to-sales ratio for 2018 is 2.6x.

Moreover, its trailing-12-month EV-to-cash flow was 17.3x compared to its trailing-12-month EV-to-free cash flow of 21.1x.

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Relative strength index

In the last 14 days, Yelp has reported a relative strength index (or RSI) of 61 compared to the RSIs of 33, 29, 57, and 47, respectively, reported by PayPal, eBay, Yandex, and Square within the same period.

Eye on Yelp’s price multiple

Yelp’s book value per share works out to $13.2, while its estimated book value per share is $13.3. The stock is trading at a price-to-book value of 3.5x.

The company’s price-to-sales ratio in 2017 was 4.5x, and its estimated price-to-sales ratio for 2018 is 3.9x.

Market cap

On May 2, Yelp was the smallest Internet player in terms of market cap globally at ~$3.8 billion. In comparison, PayPal had a market cap of ~$85.2 billion, eBay had a market cap of ~$36.9 billion, Yandex had a market cap of ~$11.0 billion, and Square had a market cap of ~$19.5 billion.

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