Google Inc (GOOG), Facebook Inc (FB): Is Yahoo! Inc. (YHOO)’s Turnaround Finally Paying Off?

A key factor in Facebook Inc (NASDAQ:FB)’s mobile success seems to be its effectiveness in targeting potential customers. COO Sheryl Sandberg was quoted as saying that: “The most important work we’ve done over the past year is around custom audiences.” Expectations are highly strung for Facebook’s third-quarter report, analysts calling for earnings of $0.18 per share versus $0.12 for the same period a year ago.

Valuations and Metrics

Yahoo!’s questionable performance over the last few years has left the stock trading at an absolute bargain, especially compared to the competition. The stock currently trades at only 7.63 times trailing earnings, versus Google’s 25.07, and Facebook’s lofty 187.06. While the competition is clearly outperforming Yahoo!, the stock does seem just a bit too cheap. The stock has a good return on equity of 31.55% and an excellent balance sheet, with only $49 million in debt and $2.63 billion in cash, leaving the company with plenty of money to continue its acquisition spree.

The Bottom Line

ComScore’s most recent survey of web traffic paints an interesting picture of Yahoo!’s turnaround story. Clearly, some of the company’s efforts have paid off in terms of monthly users, the website now once again in first place. Yet, many questions remain as to the company’s ability to actually profit from this increase in users, as it has been struggling over the last few years to increase revenue. In any case, the competition seems to be doing a considerably better job of this. However, the news is certainly encouraging, and the stock has plenty of room to run considering its valuation.

The article Is Yahoo!’s Turnaround Finally Paying Off? originally appeared on Fool.com is written by Daniel James.

Daniel James has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google, and Yahoo!. The Motley Fool owns shares of Facebook and Google.

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