Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Monster Worldwide (NYSE:MWW) rose as much as 12% Thursday after broker Evercore Partners upgraded the stock from a "hold" to a "buy" and simultaneously raised their price target a whopping 31% to $8.50. By 3 p.m. the stock had settled to a 1.3% increase from the previous day's close.
So what: Monster Worldwide's shares popped by 14% on Feb. 10 after the company announced fourth-quarter earnings per share (EPS) that beat Wall Street's expectations, along with relatively upbeat guidance for the current year. The following day, the stock enjoyed another 7% increase as FBR & Co. upgraded it to "outperform" and raised its target price to $6.80 from $4.50. As a result, the shares of Monster Worlwide have smashed the S&P 500 index this year, but a five-year graph tells a very different tale:
Now what: Evercore's $8.50 price target values the company at 33 times this year's EPS estimate and 15 times next year's estimate. The latter figure is probably more representative with regard to the shares' valuation; despite patchy profitability on the basis of generally accepted accounting principles (GAAP), Monster generates consistently positive operating cash flows. The stock trades at an enterprise value-to-trailing-12-month free cash flow multiple of 18.6.
In fact, on some metrics (price-to-sales, price-to-book value, enterprise value-to-forward EBITDA) Monster shares looks more like a deep value play. For investors who like to bet on these sort of situations, Monster Worldwide may be worth a second look; personally, I'd recommend individual investors focus their limited time and attention on more dependable, higher-quality businesses instead.
Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.