There’s been little significant news of note since Trade Me: Interim result 2017 in February. The share price has rebounded 11% and now sits slightly above our existing Buy price.
The main news has been that the New Zealand employment market remains strong, with listings growing by more than 15% in the first quarter of calendar 2017. Several personnel changes have also occurred, reflecting the evolution of the business we’ve discussed in previous reviews.
We’ve also re-evaluated our valuation recently, reflecting continuing growth and excellent cash flow. Given the small market and dynamic competitive environment, we’ve tended to err on the conservative side. However, Trade Me remains a very strong business and 2018 should be another year of decent earnings growth.
Reflecting all that, we’re making minor changes to our price guide, lifting our Buy price to $5.50 (from $5.00) and our Sell price to $8.00 (from $7.50). If you’ve been looking to buy the stock, that gives you a little more wriggle room. In fact, its free cash flow yield is higher today than when we first upgraded the stock back in 2014. As usual we advise buying on negative news, but Trade Me remains a BUY for up to 6% of your portfolio.
Note: The Intelligent Investor Growth and Equity Income portfolios own shares in Trade Me. You can find out about investing directly in Intelligent Investor and InvestSMART portfolios by clicking here.
Disclosure: The author owns shares in Trade Me.