Value Is Sometimes Not Where You Expect It To Be

| About: Limited (CYOU)
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As I write this, people fall over themselves to buy's (NASDAQ:AMZN) +29% revenue growth. For this, they pay 270 times 2012's estimated earnings, and have to ignore the ongoing implosion in earnings and estimates that has been enduring for over one year.

Yet, at the same time, as stock such as (NASDAQ:CYOU) reports earnings. And beats estimates on all counts (revenues and earnings), and guides up for both earnings and estimates. Not happy with this, the company also announces a $3.8 special dividend per share - a dividend equal to 19.6% of the share price before the company reported.

Not only does CYOU beat expectations, but it posts strong numbers as well - these are not expectations like's, routinely slashed by 90% so that can meet them. CYOU reported 30% year-over-year revenue growth, and 16% year-over-year earnings growth (compare that to's 96% plunge in earnings last quarter).

CYOU, with these nice earnings, obviously added to the giant cash pile that allows it to now pay a special dividend. The cash grew all the way to $464.9 million in the latest quarter, from $396.8 million the quarter before (AMZN's cash hoard is going down, not up).

And margins? This company has margins. CYOU has an operating margin of 56%. This is not an online retailer with margins close to 0% like

Basically, CYOU is everything that is not, on most every count. So how much was this monster trading for before it presented these earnings? 500 times earnings? 600 times earnings?

No. CYOU was trading for 4.1 times estimated 2012 earnings before it reported.

So the analysts must have been swarming over it, you think? Well, on a scale of 1.0 (Strong Buy) to 5.0 (Sell), CYOU had a mean recommendation of 2.3. 2.1.

So there you have it, value is not always where one would expect it to be. is worse than CYOU on every count, and yet trades at an earnings multiple that was a full 65 times higher than CYOU's. On this basis, is 65 times more expensive than CYOU. And the analysts love it more. Go figure.

Me? I'd rather be long CYOU and hedge it with an AMZN short.

Disclosure: I am long CYOU.

Additional disclosure: I am also short AMZN.