Should Investors Follow Billionaire Dan Loeb Out Of Yahoo! Inc. (YHOO)?

Although Loeb is selling off some shares, it could well be just the hedge fund taking some profits. Yahoo! has a strong standing in the industry and room for growth, not to mention its strong balance sheet, which has no debt:

On a valuation basis, Yahoo! is somewhat expensive, with a forward price to earnings ratio that ranks above both major competitors Google and Microsoft:

However, when shedding more light on Yahoo!’s valuation, it doesn’t seem so unreasonable. The stock has some of the more robust expected growth — as measured by Wall Street’s EPS growth expectations. Coupling this growth with the valuation, Yahoo! is a ‘growth at a reasonable price’ opportunity.

If Yahoo! really is the next AOL shouldn’t it trade like it? Putting a price to earnings multiple of 20 times (near AOL’s forward P/E) on Yahoo!’s 2013 expected EPS and the stock shows potential upside of 22%. The turnaround story is still there, with growth opportunities remaining in international markets and the mobile sector.

The article Should Investors Follow Billionaire Dan Loeb Out Of Yahoo? originally appeared on Fool.com and is written by Marshall Hargrave.

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