Groupon Inc. Shares Might Be the Best-Valued Stock in the Social Space

Groupon has one of the lowest price-to-sales ratios and 12-month forward EPS multiples in the social space.

Jun 12, 2014 at 8:04PM

Groupon (NASDAQ:GRPN) reached a high of nearly $12 per share in January, and year to date, the stock is down approximately 55%. While the whole social space, including, but not limited to, Angie's List (NASDAQ:ANGI), Yelp (NYSE:YELP), and LinkedIn (NYSE:LNKD), have also corrected, Groupon trades at a substantial discount to the sector.

Groupon's growth story is still intact
Groupon's active customer base continues to grow, recording 24% year-over-year growth. The breakdown comprises 21.8 million members in North America, 14.5 million in EMEA, and 15.5 million in other areas of the world. For the quarter, active deals exceeded 200,000 globally, compared to more than 140,000 at the end of the fourth quarter of 2013. In addition, the company has a very healthy balance sheet with nearly $1 billion in cash and cash equivalents

Why has Groupon's stock corrected by so much?
One reason for the big decline might be that the market is rethinking Groupon's growth prospects, adjusting the company's valuation to the downside. For what reason?

According to a report by IBISWorld, while the daily deals industry in 2013 was worth $3.3 billion in revenue (recording 15% annual growth), the sector's growth is projected to plummet and remain constant at 4% annually until 2018, when the industry as a whole will be worth no more than $4 billion in revenue.

However, even if these projections turn out to be true, there is nothing preventing Groupon from increasing market share within the sector and growing faster. For example, Groupon's marketplace ("Pull") continues to gain traction. In March 2014, approximately 9% of total traffic in North America was searched, with customers that searched spending significantly more than those that did not. 

The company is also gaining traction in mobile. In March 2014, 54% of global transactions were completed on mobile devices. Over 80 million people have now downloaded Groupon mobile apps worldwide, with over 10 million people downloading them in the first quarter alone. As a result, the company has increased its full year outlook, and now expects Adjusted EBITDA to exceed $300 million.

Valuation is the key
Putting growth issues aside, even if the sector sees very low growth over the next several years, the main question is if the stock is currently a bargain after its recent 55% tumble.

To come to a conclusion, we have to compare Groupon to other companies in the social space. Granted, that this is not exactly an apples-to-apples comparison, but nevertheless it could give clues as to whether Groupon is worth buying at current levels.


P/E (12-month forward)

Price/Sales (trailing)

Price/Sales 2014

Price/Sales 2015

Market Cap

Revenue 2014

Revenue 2015






$4 billion

$3.2 billion

$3.68 billion






$19 billion

$2.13 billion

$2.82 billion






$4.67 billion

$366 million

$524 million

Angie's List 





$655 million

$330 million

$412 million

Using average analyst estimates, Groupon currently has the lowest price-to-sales multiple of any of the stocks in the table above. For example, LinkedIn currently sells at a multiple of 11, when Groupon sells for 1.45.

Even more interesting, Groupon trades at a multiple of 1 with 2015 estimates. But, even taking EPS as a metric, Groupon has the lowest 12-month forward P/E among the group. While the price-to-sales multiple is not the ideal metric by which to judge stocks, it is very good when a company has little or no profits, as is the case with all of the above stocks.

Bottom line
Looking at the social space, Groupon has one of the lowest price-to-sales multiples in the industry, plus one of the lowest 12-month forward EPS multiples.

So considering Groupon from a pure valuation perspective, it is probably one of the best-valued stocks in the social space, with good protection to the downside at current levels. In addition, the company's share repurchase program should help EPS acceleration in the long term, even if growth slows over the next several years.

Are you ready for this $14.4 trillion revolution?
Have you ever dreamed of traveling back in time and telling your younger self to invest in Apple? Or to load up on at its IPO, and then just keep holding? We haven't mastered time travel, but there is a way to get out ahead of the next big thing. The secret is to find a small-cap "pure-play" and then watch as the industry -- and your company -- enjoy those same explosive returns. Our team of equity analysts has identified one stock that's ready for stunning profits with the growth of a $14.4 TRILLION industry. You can't travel back in time, but you can set up your future. Click here for the whole story in our eye-opening report.

George Kesarios has no position in any stocks mentioned. The Motley Fool recommends, Apple, and LinkedIn. The Motley Fool owns shares of, Apple, and LinkedIn. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers