OpenTable, Inc: Management Is Aligned With Shareholders

Apr.24.11 | About: OpenTable, Inc. (OPEN)

OpenTable, Inc (NASDAQ:OPEN) is one of the stock market's hottest companies. Since it went public on May 22, 2009, the stock has risen from $28.71 to $115. The online restaurant reservation network was founded in 1998 and operates in the United States, Canada, Mexico, Europe and Asia. The company operates by charging restaurants a one-time installation fee, a monthly suscription fee for software and hardware as well as a fee for each seated online reservation guest. In 2010, the installation revenues accounted for 8% of total revenues.
Reason to like OpenTable, Despite Rich Valuations
While the company could enjoy attractive growth opportunities in the future, the company trades at obscene valuations. OpenTable has a trailing P/E of 197.77, a forward P/E of 69.46, a price/sales of 26.38 and revenue growth of 44% from 2009 to 2010. While this revenue growth is well above average, it is not impressive for a company with such a high price/sales and moderate profitability. While there is nothing to like about the valuations, there is something that investors should pay attention to - OpenTable Inc's top executives have large stakes in the company.


Management Stock Ownership

Executive Shares Beneficially Held
Jeffrey Jordan 739,458
Matthew Roberts 35,999
Joel Brown 31,536
Michael Dodson 24,799
Charlie McCullough 53,784
Click to enlarge


Jeffrey Jordan's 2010 compensation was $3,315,866. Based on a stock price of $115, Jordan's position is worth $85 million. This puts his OpenTable stock holdings at 26x his most recent compensation. The rest of the top executives had 2010 compensations between $1,214,382 and $1,385,949. Based on their respective holdings, the multiples still range from 2x to 4x 2010 compensation.

The stock ownerships among OpenTable's top management is reassuring. While management stock ownership is not a sufficient reason to purchase a stock, it is a valuable piece of information. It improves the likelihood that management's incentives will be aligned with the incentives of minority passive investors. This probably isn't enough to sway an OpenTable bear, but this information should only increase confidence among OpenTable bulls.



Data source: 2010 Proxy

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.