Yelp (YELP) and TrueCar (TRUE) Critical Review

Yelp (NYSE: YELP) and TrueCar (NASDAQ:TRUE) are both computer and technology companies, but which is the superior investment? We will compare the two companies based on the strength of their earnings, dividends, valuation, analyst recommendations, institutional ownership, risk and profitability.

Valuation and Earnings

This table compares Yelp and TrueCar’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Yelp $713.07 5.27 -$4.67 $0.22 209.01
TrueCar $277.51 0.00 -$41.70 ($0.35) N/A

Yelp has higher revenue and earnings than TrueCar. TrueCar is trading at a lower price-to-earnings ratio than Yelp, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Yelp and TrueCar’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Yelp 2.31% 2.26% 2.05%
TrueCar -9.86% -11.00% -8.49%

Analyst Recommendations

This is a breakdown of current recommendations for Yelp and TrueCar, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Yelp 0 17 19 0 2.53
TrueCar 0 4 7 0 2.64

Yelp currently has a consensus price target of $43.40, suggesting a potential downside of 5.60%. TrueCar has a consensus price target of $18.33, suggesting a potential upside of Infinity. Given TrueCar’s stronger consensus rating and higher possible upside, analysts clearly believe TrueCar is more favorable than Yelp.

Insider and Institutional Ownership

89.3% of Yelp shares are held by institutional investors. Comparatively, 92.0% of TrueCar shares are held by institutional investors. 10.1% of Yelp shares are held by insiders. Comparatively, 15.5% of TrueCar shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

Yelp has a beta of 1.29, indicating that its share price is 29% more volatile than the S&P 500. Comparatively, TrueCar has a beta of 2.93, indicating that its share price is 193% more volatile than the S&P 500.

Summary

Yelp beats TrueCar on 7 of the 12 factors compared between the two stocks.

Yelp Company Profile

Yelp Inc. (Yelp) connects people with local businesses by bringing ‘word of mouth’ online and providing a platform for businesses and consumers to engage and transact. The Company offers local business review sites. Yelp provides a platform for consumers to share their everyday local business experiences with other consumers by posting reviews, tips, photos and videos, and to engage directly with businesses, through reviews, its Request-A-Quote and Message the Business features, and by completing transactions on the Yelp Platform. Yelp also provides businesses of all sizes with a range of free and paid services that help them engage with consumers. The Yelp Platform allows consumers to transact with local businesses directly on Yelp through Yelp Reservations, its online reservations product, and integrations with partners ranging from Shoptiques.com (boutique shopping) to GolfNow (tee time booking) to BloomNation (flower ordering).

TrueCar Company Profile

TrueCar, Inc. is an Internet-based information, technology, and communication services company. The Company has a data-driven online platform, which features market data and analytics. The Company-branded platform is available on its TrueCar Website and mobile applications. It customizes and operates its platform on a co-branded basis for its affinity group marketing partners, including financial institutions, membership-based organizations, and employee buying programs for a range of enterprises. The Company enables users to obtain market-based pricing data on new and used cars, and to connect with its network of TrueCar Certified Dealers. Its network of over 13,000 TrueCar Certified Dealers consists primarily of new car franchises, as well as independent dealers selling used vehicles. Its subsidiary, ALG, Inc., provides forecasts and consulting services regarding determination of the residual value of an automobile at given future points in time.

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