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For years, Yahoo's (NASDAQ:YHOO) stock was a falling angel, as a number of missteps undermined the company's growth scaring long-term investors away from the stock. Since the hiring of a new CEO Marissa Mayer, Yahoo's stock has turned around, trading near a 52-week high.

Yahoo's fall from grace can be attributed to the failure of the company to recruit and retain the right leadership. In the meantime, Yahoo has been growing bigger by acquiring one start-up after another. Between September 1997, and April 25, 2011, Yahoo acquired 64 companies, often paying a hefty premium like the $5.7 billion it paid for Broadcast.com and $432 million for eGroups. The problem, however, is that most of these companies were in the wrong space, as Yahoo has failed to expand its presence in mobile search and the social media.

Expanding in the wrong direction, Yahoo failed to keep up with Google (NASDAQ:GOOG) and Facebook (NASDAQ:FB). Worse, Yahoo did fail to achieve "economies of scale," the benefits associated with the large size. This can explain why the company has failed to boost its top and bottom lines, disappointing its stockholders.

Yet, Yahoo is trading at a low multiple, below that of Google and AOL; it has reasonable operating margins; enjoys a strong industry franchise; and has taken a number of steps to undo the mistakes of the past. It sold its $ 4.3 billion stake in Alibaba and has recruited a new CEO Marissa Mayer with extensive experience in mobile internet as a previous VP at Google, who is moving the company in the right direction: mobile internet, where growth is - In 2011 global mobile internet subscribers per 100 people increased by 87 percent, compared with 8.5 per 100 people of traditional internet. Specifically, Mayer wants to personalize the Internet, from search, to content distribution, to ads, and e-mail (as she did recently). Will this strategy be executed effectively? Will it help Yahoo catch up with Google?

Judging from the last earnings report, the answer is yes. That's why the stock is a buy, especially at these valuation rates.

Company

Yahoo

AOL

Google

Forward PE

17+

28.25+

15.30*

Operating Margin

16.01 %

11.13%

30.76%

Qtrly Revenue Growth (yoy)

-1.20%

-2%

35.30%

Qtrly Earnings Growth (yoy)

977.40%

--

11.20%

*Fye Sep 24, 2013

+Fye Dec 31, 2013

Source: Yahoo.Finance.com

The bottom line: With a strong franchise, sound fundamentals, and a new leader who moves in the right direction, Yahoo has a good chance to rise again. Long-term investors may want to accumulate the stock, but always keep in an eye in the rapidly changing technology landscape where winners quickly become losers.

Source: A Fallen Angel Is Rising Again