Zillow, Trulia, and Which One After Earnings?

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The online real estate marketplace has had a rough earnings season, as companies Zillow (NASDAQ: ZG  ) , Trulia (NYSE: TRLA  ) , and (NASDAQ: MOVE  ) all saw significant losses following their quarterly reports. Yet, given those losses, might investors find a golden investment opportunity?

Are these businesses the same?
Zillow and Trulia operate a nearly identical type of business, serving as an online-marketplace to the real-estate market, collecting revenue mainly from realtors who advertise and gain exposure from large networks.

However, is different: The company operates a collection of Internet properties in all things real estate, including and Unlike Trulia and Zillow, does not generate the majority of its revenue from realtor relationships, but rather advertising.

Also, operates in the software-as-a-service (SaaS) space with its customer relationship management system, called TigerLead. Looking ahead, the high-margin nature of SaaS has become a bit of a catalyst for

A look at post-earnings performance
With that said, look at how each stock performed last week, compared to the NASDAQ.


Week of Feb. 7









As you can see, it was a rough week for these companies, as each stock responded negatively to earnings.

However, Zillow beat revenue and EPS expectations and also raised guidance ahead of the consensus. Zillow's EPS of $0.19 was a $0.12 beat, and its 70% year-over-year revenue growth was a boost to the third quarter's 67% pace.

On the other hand, Trulia's $0.03 EPS was $0.04 short of the consensus, but its 141.8% revenue growth easily surpassed expectations. Yet, the fact that guidance didn't surpass expectations served as a bit of disappointment to shareholders.


2014 Revenue Outlook

Implied Growth


$290 million



$246 million


Furthermore, examining each company's mid-point revenue guidance (seen above), Zillow and Trulia are trading at 10.9 and 4.55 times this year's guided sales, respectively. While Zillow has more cash on its balance sheet, operates more efficiently, and is seeing faster monthly user growth, Trulia is cheaper and growing faster.

What about is the other side of the equation, operating a different business model, but a very similar service.'s quarter was mixed, as revenue grew just 7.1%, but its EPS of $0.11 did surprise to the upside. While is not growing at the same level as Zillow or Trulia, it is profitable and its growth in SaaS gives it a niche market that could continue to produce solid annual growth.

In particular, its SaaS business grew 12% in the fourth quarter to $12.9 million, meaning it now makes up nearly 23% of total sales, versus 18% last year. Clearly, the company hopes to make SaaS a larger chunk of the total pie. Thus, investors must determine if two times 2014's guided sales is enough to make a better investment than its peers.

Final thoughts
There's no debating that Zillow and Trulia are growing fast, but these companies are spending just as aggressively to achieve that growth, and are directly competing against each other to maintain it. looks cheap at two times future sales, but with 70% growth and just 4.5 times forward revenue, Trulia looks better. Granted, much of Trulia's growth is occurring via the acquisition of Market Leader, but Trulia's strategy is to grow through acquisitions. Given's success, investors shouldn't be shocked if Trulia or Zillow moves into the SaaS market.

In that case, wouldn't have an edge, and with low double-digit growth, it's hard to imply that this stock has more upside than Trulia. As for Zillow, it's just too pricey. Therefore, with Trulia, investors get the best of both worlds: The growth of Zillow with the value of, clearly a win-win scenario for those looking to invest in this space.

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Brian Nichols

Brian Nichols is the author of "5 Simple Steps to Find the Next Top-Performing Stock: How to Identify Investments that Can Double Quickly for Personal Success (2014)" and "Taking Charge With Value Investing (McGraw-Hill, 2013)". Brian is a value investor, but emphasizes psychology in his analysis. Brian studied psychology in undergrad, and uses his experience to find illogical value in the market. Brian covers technology and consumer goods for Motley Fool. Brian also updates all of his new and current positions in his Motley Fool CAPs page. Follow Brian on Twitter and like his page on Facebook for investment conversations and recent stories.

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