How do you feel when you see so-called dot com company shares soaring again? I’m a little cautious myself, but at least this time round it’s mostly ones with viable business models and some impressive profits to show for it. Some prices are getting a bit high — but are they still bargains?
Gamble on gambling?
You might eschew gambling itself, as I do, but it’s big business. Investors in Betfair (LSE: BET) know that all too well, as they’ve seen their shares more than double in value over the past 12 months, to 2,837p. The longer term ride for Betfair has been a bit rockier, but with the exception of 2013 we’ve seen annual EPS rises averaging around 50% — the firm recorded 34p per share in 2014, compared to just 5.9p back in 2011.
The trouble is, EPS is forecast to rise by only 14% over the next two-year period, which would represent a rapid slowing. Yet the shares are still on a clear growth valuation, with a forward P/E of nearly 37 for this year dropping only as far as 31 on 2017 forecasts.
The pundits are still on a strong Buy consensus, and if faster growth should resume then they could be right — but it’s not one for me.
Which comparison site is best?
Then we come to the runaway success that is Moneysupermarket.com (LSE: MONY). Here we’re looking at a more modest 12-month share price rise of 73% to 331p, but over five years that rises to 365%. Last month’s first-half report told of a 30% rise in adjusted EPS for the period, and the company upped its interim dividend by 10% to 2.55p.
Moneysupermarket.com has actually been paying decent dividends for a few years now, with 2014 bringing in a 3.4% yield. Forecast yields for this year and next drop to under 3%, but that’s only because of the soaring share price — in actual cash, they’re growing by about 10% per year.
But again we’re facing slowing growth, with EPS predicted to rise by only 10% this year and 7% next. And at the same time, we have higher-than-average forecast P/E values — though in the 22 to 24 range, they’re only about 65% above the long-term FTSE average of 14.
Finally we come to online estate agent Rightmove (LSE: RMV), whose shares have provided the most impressive five-year gain of the three — up 530% to 3,782p, including a 12-month gain of 56%.
Rightmove has achieved something impressive in that it’s become the “go to” online place for buying and selling houses (and just for checking on prices), and competing with that is not easy. That’s helped provide EPS rises of around 25 to 30% per year for the past five years, but again the City is expecting that growth to slow and has 14% penciled in for this year and the same next.
And with that slowing growth we get big P/E multiples, of 33 based on 2015 forecasts, followed by 29 a year later. That’s more than double the market average, with dividend yields of only around 1%.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Moneysupermarket.com and Rightmove. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.