Through TheFLY's Eyes: Yahoo! Inc.

from Theflyonthewall.com






Valuation Remains Cheap

Over a month ago, we did an asset break up value on Yahoo! (YHOO). Since that time, Yahoo's market cap has remained unchanged. Despite increased competition primarily from Google (GOOG), Yahoo has an important position as a lead portal and is too cheap to be ignored by investors.

Yahoo! Market Cap. = $ 49.0 Billion
Less: Yahoo! Japan Stake = $ 12.4 Billion
Less: Alibaba (Chinese Portal) = $ 1.4 Billion
Less: Cash - Debt = $ 2.0 Billion
Enterprise Value = $ 33.2 Billion

Yahoo is expected to generate EBITDA of $2.1 billion for FY 2006 and $2.6 billion in FY 2007, a 26% growth rate for a company trading at 16.6x and 12.7x multiples for the next two fiscal years. That is too cheap for investors ignore.

Leading growth companies almost always correct way before the rest of the market does. Yahoo and Google have been in correction mode for most of 2006. However, during the last few weeks, both stocks have been relatively stable while the broader market has been weak. This stable price performance is most likely a sign of better things to come.