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Today’s trading in the HomeAway (AWAY) aftermarket may be an example of the "greater fool theory," or it may be an example of "buy at the market" orders by speculators who don’t know the valuation metrics.

AWAY touched $42, up 55.5% from the IPO price of $27. At $42 per share AWAY's market capitalization was $3.36 billion.

And the AWAY CEO fanned the speculative flames with his probably accurate comment that “HomeAway’s IPO can drive users to a vacation rental site” (click here for Bloomberg story).

But do speculators know the following, calculated at a $40 AWAY price?
Price-to-sales: 17
Price-to-adjusted trailing twelve month earnings (see below): 600
Price-to-EBITDA: 100
Price-to-free cash flow: 60
Price-to-tangible book value: 77

The above metrics have never supported an historical internal growth rate of only 30%, except in the halcyon bubble days of 1999 and 2000.

Seems like investors who got AWAY at he offering price of $27 should enjoy the ride and bail out ASAP.

See our pre-IPO analysis of AWAY here, in which our point was to "stay away from AWAY" in the after market.

Valuation Ratios

IPO Mrkt

Price /

Price /

Price /

Price /

% offered

12 months ended March 2011

Cap (mm)

Sales

Earnings

BookValue

TangibleBV

in IPO

HomeAway (AWAY), $40

$3,200

17.4

640

7.7

76.9

6%

For the 12 months ended March 2011

Revenues ($mm)

$184

Adj after-tax profits

$4.7

Profit % of rev

3%

Price to free cash flow-trailing 12 months through March 2011

60

Price to EBITDA for the 12 months ended March 2011

100

Quarterly results

Dec 2009

Mrch 2010

June 2010

Sept, 2010

Dec, 2010

March, 2011

Revenues ($mm)

$32

$36

$42

$45

$45

$52

Sales & Marketing % of rev

40%

44%

33%

28%

36%

44%

General & Admin % of rev

26%

24%

24%

23%

27%

20%

Operating income $mm

$0.3

-$0.5

$4.9

$8.5

$0.9

$0.7

Operating income %

0.8%

-2%

12%

19%

2%

1%

Pre-tax income (loss)

-$0.2

-$1.6

$1.8

$5.5

$0.1

$0.4

Assume 40% tax rate on

pre-tax income (loss)

-$0.2

-$1.6

$1.1

$3.3

$0.0

$0.2

Net income (loss)

0.8%

-1.5%

12%

19%

2%

1.3%

Free cash flow, p69

$5

$16

$14

$9

$13

$18

Free cash flow % of rev

17%

45%

33%

19%

28%

34%

Source: HomeAway: 'Greater Fool Theory' in Action?