A Solid IPO For Trulia

| About: Zillow Group, (Z)

By Tejas Venkatesh

Amid the consumer tech IPO lull following the Facebook (NASDAQ:FB) offering, real estate website Trulia (TRLA) enjoyed a solid opening on its first day as a public company. First, it priced a dollar above its indicated range, at $17 per share. Then, encouraged by its robust growth, investors bid up the stock further to $23 per share.

Trulia provides an online marketplace, delivered through the web and mobile applications, that lets consumers and real estate professional connect with each other. Unlike traditional real estate websites like REALTOR.com, Trulia gives users detailed information on crime, commute and schools.

On the top line, the company has put up astonishing growth. In the 12 months ended in June, Trulia generated $51m in revenue, up from $38m in calendar year 2011. It makes money from a combination of advertising on its website and a freemium model for real estate professionals, with the latter accounting for more than two-thirds of its revenue.

The offering valued Trulia’s equity at $448m, or 8.8 times trailing sales, and the company currently garners a market cap of roughly $600m, or 12x trailing sales. That’s good value creation for Trulia, which has raised roughly $33m in venture capital from Accel Partners, Fayez Sarofim and Sequoia Capital. In addition to high growth, public investors were also surely encouraged by the broader housing recovery in recent months.

That’s not to say that Trulia couldn’t have done better. In recent weeks, its primary rival Zillow (NASDAQ:Z) has traded close to 14x sales. In part, that can be explained by Zillow’s bigger size and outpaced growth. In the 12 months ended in June, Zillow doubled its sales, reaching $90m. But last week, Zillow filed a lawsuit against Trulia, alleging that the company infringed upon a home valuation patent. Trulia denies the allegations. While the eventual outcome is not yet known, investors likely factored that into the stock price.

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