Afraid Of LinkedIn's Valuation? You Shouldn't Be

| About: LinkedIn (LNKD)

If you believe the nascent jobs recovery will accelerate rather than decelerate, then picking up stocks tied to job growth, such as LinkedIn (NYSE:LNKD), makes sense.

After all, LinkedIn is disrupting the recruiting industry in a way last seen when Monster (NYSE:MWW) dealt a death blow to the newspaper industry.

Today, it's Linkedin delivering the blows.

While Facebook (NASDAQ:FB) users are more likely to fawn over funny pet pictures, LinkedIn users are more likely to scour networks for connections to fast growing companies.

Over 200 million people have created LinkedIn online profiles and recruiters are using these digital resumes to find candidates more quickly and effectively - for a price.

And, those prices are adding up.

They helped LinkedIn's revenue jump 81% to $303.6 million and allowed the company to grow non-GAAP earnings per share by 192% to $0.35 from a year ago. For the full year, LinkedIn's sales climbed 86% to $972 million and non-GAAP earnings per share rose to $0.89 from $0.35 in 2011.

LinkedIn's success is coming at Monster's expense.

Much to Monster's dismay, LinkedIn's Talent Solutions group continues to win share. Sales from the unit increased 90% to $161 million last quarter and the segment - formerly known as Hiring Solutions - handily topped Q3's sales of $138.4 million.

In stark contrast, sales at Monster fell 10% to $211 million.

The embrace of LinkedIn as a preferred recruiting tool isn't being lost on members. Increasingly, users are willing to pay for greater access.

Last quarter, membership revenue climbed 79% to $59 million, accelerating from the 74% year-over year jump in Q3. The pool of potential future subscribers also got larger, with overall membership up 39%.

And, it's not just job hunters and seekers embracing LinkedIn.

The rich data LinkedIn holds on professional minded members is very attractive to advertisers of all shapes and sizes. Companies looking to win white collar wallets spent 68% more on LinkedIn advertising last quarter than a year ago, generating $83 million in sales.

It doesn't hurt to see LinkedIn's user base is increasingly global either. While the United States remains the biggest source of revenue, accounting for 63% of sales. But international sales totaled $114.6 million in the quarter. The global expansion has pushed membership over 200 million users, up from 100 million in March 2011.

What could be most impressive is the results in talent solutions occurred during a quarter littered with cautious CEO comments tied to the fiscal cliff. If we assume it wasn't all rhetoric, employment related growth would likely have been stronger.

Of course, no one should confuse LinkedIn for a value stock. It's expected to earn $2.07 in 2014, which gives it a forward PE ratio of 76x.

But, if we assume Monster's $800 million revenue run rate remains in play, there appears significant room to grow. Especially if the economy drives job creation higher rather than lower.

If so, investors should use any market driven sell-off as an opportunity to buy, because LinkedIn is likely to remain a high PE stock longer than some might expect.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in LNKD over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.