The Uber for Home Repair (Gems #13)
This Week's Undervalued Stock is Angi Inc. (NASDAQ: ANGI).
Welcome back to Closingbell Gems #13!
This newsletter will cover:
1. Macroeconomic Highlights
2. Industry Insights
3. Our Undervalued Stock of the week: ANGI (NASDAQ: ANGI).
Here are the Top 5 Trending Stocks on Closingbell:
🔎 Macro-Watch
“Zero” - The pace of inflation has slowed as price increases in July as the inflation pace cooled down from 9.1% in June to 8.5% in July. Fuel costs sinking helped drive the pace of inflation lower although this pace of inflation is still the highest it's been for approximately four decades.
Bear Market Canceled? - The Nasdaq and NYSE bounced back from bear market territory as the U.S. markets bounced back on good inflation and unemployment news. The Nasdaq entered a bull market (20% increase from the trough) on Thursday of the prior week.
🏛️ Industry Insights: Interactive Media Services - Home Advisory
Interactive media service companies that operate in the home advisory space make their money from advertising and receive kickback for pre-priced offerings on its platform(s).
Angi Inc. (NASDAQ: ANGI)
About Angi Inc. (NASDAQ: ANGI)
Introduction
Also known as the Uber for home services, Angi is a company that provides on-demand and scheduled home maintenance and improvement services. It’s as simple as creating an account, exploring their offerings, and booking an estimate all on the same web/app platform.
Differentiator
Angi is the company market leader in home service improvement offerings that utilize a specific application platform.
📈 Price Forecasts by Analysts
The current consensus among 11 polled investment analysts is to BUY stock in Angi Inc.
The 11 analysts offering 12-month price forecasts for Angi Inc. have an average price target of $8.85, with a high estimate of $13.00 and a low estimate of $5.00. The average estimate represents a +67.6% increase from the last price of $5.28.
Market Metrics and Valuation
Companies within the home improvement and maintenance service technology industry commonly use price-to-sales ratios for valuation methods if they have no positive free cash flow or EBITDA.
✅ Compared to other publicly traded on-demand/appointment service providers, Uber, and Yelp trade at higher valuations than Angi Inc.
✅ Angi demonstrates strong growth despite trading at a significantly lower price-to-sales ratio than some of its peers.
Risks to Consider
❌ With macroeconomic challenges ahead and valuations shrinking, Angi will face one of its toughest times yet in weathering the turbulent economy
❌Increasing interest rate environment means more pressure on turning cash flow positive as cost of capital increases making it more difficult to find more capital
❌ With housing purchases slowing, the demand for home services may increase in the short term but the intermediate and long-term demand for home improvement/maintenance is still in question
Recent Quarterly Earnings
Angi Inc. recently topped estimates for both revenue and EPS stating that as the housing buying frenzy and market slows, contractors begin to spend more on advertising and outreach via the Angi platform.
📰 Recent Headlines
MarketWatch: Why the end of the pandemic home-improvement frenzy is actually good for this home-improvement website
Final Thoughts - Angi Stock Performance
Angi has fallen significantly from its highs at $14.40 a share. The drop represents a -63.33% decline from its peak on September 20th, 2021. In addition, macroeconomic factors will provide significant headwinds for Angi going forward. However, with strong revenue growth similar to Uber along with a favorable price to sales ratio valuation, and one of the very few players focused on home improvement in the market make this a somewhat risky but attractive long term play. This is what makes Angi our undervalued stock of the week!
If you’d like to learn more, we’ve included an Appendix with definitions of each of these metrics.
🥊 You should weigh in
Head over to Closingbell to Discuss Angi Inc (NASDAQ: ANGI):
Discuss $ANGI on Closingbell
Post a rating with your opinion about Angi Inc! Is it a buy, sell or hold? Why do you think that?
Thanks for taking the time to read this! See you next week.
Regards,
Brian
Writer, Closingbell
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Appendix: Metric Definitions
Return on Equity: A measure of how productive the company's contributed equity is in producing its profit. Calculated as earnings divided by the book value of equity of the company. A higher return on equity is often thought by investors to indicate a more profitable company.
P/E Ratio: Current stock price divided by trailing annual earnings per share. If a stock sells for $25.50 per share and has earned $2.55 per share this year, then it has a trailing P/E ratio of 10 ($25.50 / $2.55 = 10). This means the stock is currently selling for ten times its earnings. Other factors being equal, investors may regard companies with lower P/Es to be relatively less expensive.
Earnings Yield: A percentage measure of the return the company is making, based on its after-tax earnings and the current share price. Calculated as earnings per share divided by the price per share. Higher earnings yields can be interpreted as representing higher returns for an investment at the current share price.
CAGR: Represents the term Compound Annual Growth Rate which calculates the growth rate utilizing the beginning and ending year values and multiplying the result by the power of one over the total number of years.
Trailing Dividend Yield: Your annual income from your investment in the company. Indicated yield represents trailing total annual dividends divided by current stock price.
Disclaimer: The information that Closingbell provides is general in nature as it has been prepared without taking account of your objectives, financial situation or needs. It does not constitute a recommendation to buy or sell any stock. This email is not intended as legal, financial or investment advice and should not be construed or relied on as such. Closingbell is not responsible for any damages. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered legal practitioner or financial or investment adviser. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Closingbell has no position in any stocks mentioned.
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