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LogMeIn: Sell Now

Mar. 04, 2020 12:29 PM ETLogMeIn, Inc. (LOGM)2 Comments
Kelly Stewart profile picture
Kelly Stewart


  • Since I wrote my bearish piece on LogMeIn a little over 2 years ago, the shares are down about 27% against a gain of 10% for the S&P500.
  • The company is obviously less expensive now, but I still think it's overpriced because the problems I wrote about earlier persist.
  • There's little upside between the current market price and agreed merger price, so I think investors would be wise to sell now.
  • Taking the risk that things don't go smoothly for an extra 1% upside makes little sense to me.
  • I think Francisco Partners and Elliott Management are massively overpaying for this company.

In my previous, bearish, article on LogMeIn (NASDAQ:LOGM), one of the points I made is that PE multiples matter. At the time I wrote the article, the shares sported a PE of over 1,100 (!), which gave me pause. Now that the shares have come crashing back to Earth and now sport a PE just under 17, I need to update my analysis. Also, the company has obviously posted financial statements since, and so I need to investigate whether the negative relationship between revenue and earnings lingers. Finally, the company hit my radar again this past December because there’s a merger on the table, and I want to talk about the significance of that. Let’s get to it.

The Continued Relevance of Price Earnings Multiples

For those who missed it the first time, I’ll repeat what I pointed out in the previous article. As the Federal Reserve Bank of Kansas City reports:

Campbell and Shiller found that higher P/E ratios are usually followed by lower stock price growth during the following decade.

The following graphic demonstrates this point well.

Source: The P/E Ratio and Stock Market Performance by Pu Shen

There’s obviously no way to determine this conclusively, but it is interesting to ponder the extent to which current market nervousness is caused by Coronavirus fears, and how much is related to excessive valuations that we’ve seen for some time. My gut response is that a market that has gotten ahead of itself is far more susceptible to fears of this sort than one that is more reasonably priced.

With that as backdrop, it’s worthwhile thinking about the relationship between trailing and forward forecasts at LogMeIn. Although the disconnect between trailing earnings and forward forecasts are not as egregious as when I first wrote about the company, there is still a problem in

This article was written by

Kelly Stewart profile picture
Check out my tipranks: https://www.tipranks.com/bloggers/kelly-stewartContrarian. Former CEO of a small publishing company. I've been researching stocks for several years now, and my philosophy is geared towards the preservation of capital as the most important goal of investing.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (2)

Dan Victor, CFA profile picture
its down 5% .. an impressive spread to the deal.. all bets are off at this point.. thanks for the timely article and interesting dynamic
what spread r u looking for?
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