Online real estate company Trulia
Turning a blind eye to the outside world, Trulia's financials are enough to make any growth investor salivate. In the past five years, revenue has grown from $1.6 million in 2007 to $38.5 million in 2011. Sales increased over 90% last year and the year before.
Profit, however, is little more than a sparkle in Trulia's eye. The company is solidly in the red for every fiscal year, losing just over $6 million in 2011.
Trulia's growth seems unstoppable... until you take a look at its competitors. No Trulia investor should feel confident with their decision until they've taken a long hard look at Zillow
That said, there are plenty of other floundering real estate advertising companies for Trulia to trounce. Realtor.com parent Move
According to my fellow Foolish writer Morgan Housel, not only has the housing market bottomed, but it may even be on the rebound. In the past month, three macroeconomic reports have been released, all pointing to an upcoming real estate rally. The iShares Dow Jones U.S. Home Construction Index Fund
As long as this growth is sustainable, there will be plenty of prospective buyers and renters for Trulia to cater to in the years to come.
Foolish bottom line
After analyzing Trulia's financials, its competition, and the macro environment, almost everything seems in order to cash in on this newest company's IPO. But despite fast-growing sales and a recovering housing market, Trulia's competition gives me pause.
Zillow's scale not only gives it efficiency advantages, but it also plays a crucial role in the all-important network effect. Zillow welcomed 60% more visitors to its site in 2011 than Trulia, and the trend may continue to push these two companies' site traffic further apart in years to come.
Source: Zillow 10-K and Trulia S-1.
There might be room for both of these companies to exist within the growing $6 billion real estate advertising business, but for now I'm keeping my money with the larger, profitable competitor.
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