New data from eMarketer says that Yelp Inc(NYSE:YELP) is one of the emerging winners in the multibillion-dollar mobile search market. Even Google (NASDAQ:GOOGL)(NASDAQ:GOOG) is losing ground to the local search app.

Yelp is among the fastest growing participants in the mobile search advertising market. Credit: eMarketer.

Specifically, eMarketer says that mobile search spending will rise from $4.95 billion last year to $28.41 billion in 2018 with Yep outgrowing peers over most of that span. Google, meanwhile, is expected to see its share of the market drop from nearly 83% in 2012 to about 64% in 2016. What's that disruptive growth worth to us as investors? More than $10 billion, I think, putting Yelp stock in a position to double from today's $4.67 billion market cap.

3 key assumptions
My Foolish colleague Ishfaque Faruk has the statistics that explain Yelp's astounding growth, which is largely driven by mobile usage. Click here to read the story so far. Here, I'm going to show you how I get to a $10 billion or better Yelp valuation. Here are my key assumptions:

1. Specialist apps will increasingly become our go-to sources for information on mobile devices. Ever notice that when you use a smartphone you're less willing to endure the distractions of the Web? Specialist apps such as Yelp enhance the experience by giving us what we want in short order.

2. Yelp will grow in line with or faster than the mobile search industry from now through 2018. According to Yahoo! Finance, Yelp will grow profits by 86% annually over the next five years versus about 17% for the sector. S&P Capital IQ pegs revenue growth at about 42% annualized over the same period, about even with eMarketer's estimates for the overall industry.

3. Consequently, Yelp will trade for a premium multiple to industry peers. At present, Yelp trades for 17.7 times sales versus 8.3 for the overall industry. A heady premium, to be sure, but deserved when you consider Yelp's record of consistent growth despite tough and intensifying competition.

Valuation range
Now, let's do some math. The table shows a range of future market cap estimates derived from current analyst forecasts and multiplied by a series of revenue multiples -- half, double, or even with today's average as tracked by Yahoo! Finance.

Worst-Case 2018 Revenue Estimate
($841 Million)
Average 2018 Revenue Estimate
($1,332.86 Million)
Best-Case 2018 Revenue Estimate
($1,655 Million)

Worst Case Multiple 
(9x revenue)

$7,569 million

$11,995.74 million

$14,895 million

Average Multiple
(18x revenue)

$15,138 million

$23,991.48 million

$29,790 million

Best Case Multiple
(36x revenue)

$30,276 million

$47,982.96 million

$59,580 million

Source: S&P Capital IQ.

Interestingly, in the worst-case revenue scenario ($841 million), Yelp stock would need to trade for only 12 times revenue -- significantly less than today -- to reach a $10 billion market cap, a double from today's prices. Odds appear to strongly favor outperformance.

Now it's your turn to weigh in. Have a bear argument for Yelp stock? Let's hear in the comments box below.

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Google (A and C class) at the time of publication. Check out Tim's Web home and portfolio holdings, or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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