Ancestry.com (ACOM) is the leading online resource for family history. It has over 8 billion records and 1.7 million subscribers. The company has some competition online but it is very difficult for competitors to take away market share at this point. The market for web-based family trees and genealogy itself has room for growth.
Ancestry.com has grown sales from $198 million in 2008 to $400 million in 2011. Management projects revenue to be between $450 million to $475 million for 2012.
EPS was $0.51 in 2009, $0.76 in 2010, $1.29 for 2011, and should be around $1.50 for 2012. In other words, it is experiencing very strong revenue and earnings growth. Growth will inevitably slow, but will likely continue to be in the double digits for years.
With many large tech companies sitting on tens of billion in cash, it is not impossible to see a buyout bid for Ancestry.com if the price does not go up soon. Many companies such as Microsoft (MSFT), Google (GOOG), or Yahoo (YHOO) would benefit by having a fast growing web resource. Investors should not buy the stock on the expectation of a buyout alone. It is a good buy based on the growth potential and fair price it trades at today.
Ancestry.com became a publicly traded company in November of 2009 and closed at $14 its first day of trading. By April of 2011 it was at $41, before crashing to its price today of $24. Investors should not expect it to leap to $41 again this year. Investors should view it as a good 3 to 5 year holding based on strong growth and fundamentals.