Zipcar's Sustainable Growth

The following video is part of our "Motley Fool Conversations" series, in which analyst John Reeves and advisor David Meier discuss topics across the investing world.

Zipcar reported earnings recently, and we learned that profitability continued to trend upward. The company said it expects net income to finish the year between $3 million and $7 million. Sadly for shareholders, the stock got crushed nonetheless. Investors apparently were expecting more growth and the company seemed to fall short of those expectations. Despite that setback, David likes how this story is playing out, and is committed to holding this stock in our 10-Bagger portfolio for the long term.

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David Meier owns shares of Zipcar. John Reeves has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford, Hertz Global Holdings, and Zipcar. Motley Fool newsletter services recommend Ford, General Motors Company, and Zipcar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (5)

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  • Report this Comment On May 02, 2012, at 3:20 PM, dbtuner wrote:

    If they are as profitable as they say, their PE would be 100. Why would I want to own a company growing at 20% with a PE of 100?

    Enough with the pumping from MF.

  • Report this Comment On May 03, 2012, at 12:54 PM, TwinMount wrote:

    DBTUNER - You are making some assumptions that may not apply here. I am not sure that this is the case at ZIP but you should consider the following.

    Firstly, a game changing technology company with little capital requirements can grow very rapidly, but a capital intensive company needs to control costs and you will find that if it is very successful it will grow in large quantum leaps when demand outstrips supply.

    Secondly, even if customer growth is 20% profits can grow much more rapidly as the company benefits from economies of scale. ZIP in particular has a large portion of its assets in Goodwill, which won't need to be replicated to attract more members.

  • Report this Comment On May 03, 2012, at 2:59 PM, dbtuner wrote:

    I've been bashing this company the past 4 months and it is down from $16 to a new low of just above $11. I think I've been spot on

    You are WRONG that ZIP has little capital requirements. Buying and leasing cars is very capital intensive.

    ZIP will be BK in 18 months. Hertz is rolling out their car sharing to all 350,000 cars in 18 months and Avis will do so as well. Neither charge an annual fee. Fees make up 18% of ZIPs revenue.

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