I'm considering making an investment in Yahoo! and am trying to understand Yahoo!'s valuation when compared to other companies. While recognizing that Yahoo! might be considered to be in a unique position, it does seem to me that one should be able to compare Yahoo! with Time-Warner and Disney. Both companies are in the entertainment and media business and derive a considerable amount of their revenues from adverstising and subscriptions.
I took each companies' latest quarterly report and found the following:
Time-Warner
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Yahoo! Quarter X Yahoo!
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Market Valuation
as at 02/28/98 $3,276.40 $37,732.50 11.52
Sales Revenue $25.11 $9,458.00 376.74
Operating Profit $(2.60) $1,737.00 N/A
Net Asset Value $102.10 $9,498.00 93.03
Time-Warner closed at an all-time high.
Time-Warner, with sales revenues 376.74 times Yahoo!, operating profits compared to operating losses,and NAV 93 times Yahoo!, has a market valuation of only 11 times Yahoo!.
Disney
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Yahoo! Quarter X Yahoo!
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Market Valuation
as at 02/28/98 $3,276.40 $75,557.80 23.06
Sales Revenue $25.11 $22,473.00 895.16
Operating Profit $(2.60) $3,945.00 N/A
Net Asset Value $102.10 $9,498.00 169.29
Disney closed near to its all-time high
Disney, with sales 895 times Yahoo!, huge operating profits compared to operating losses, and NAV 169 times Yahoo!, has a market valuation of only 23 times Yahoo!.
It seems to me that, if the market's valuation of Yahoo! is reasonable, then Time-Warner and Disney are grossly undervalued. However, if the market's valuation of Time-Warner and Disney is reasonable, then Yahoo! must be grossly overvalued.
Am I missing something? |
