“Despite its rapid growth, HomeAway has still tapped into only a small slice of a highly fragmented $85 billion market. The company estimates there are 21 million vacation homes in the U.S. and Europe—most of which are used fewer than 30 days out of the year. HomeAway provides owners with a simple way to monetize these assets. The company collects an annual fee, averaging close to $1,500, for each listing. The high level of recurring listings has translated into steady cash flow production.
“It’s also moving to offer a pay-per-booking option, which should appeal to both professional property managers and individual owners and help to further drive revenue and additional listings. HomeAway isn’t the only company serving the home rental market, but it is by far the biggest. Trading at 38 times projected 2013 profits, the shares aren’t cheap. But with earnings likely to rise at 30% a year over the next five years, the premium price tag becomes more palatable. And while we like HomeAway on its own merits, we also see it as a potential takeover candidate by the likes of Priceline. com, Google, Microsoft, or eBay. HomeAway is a new buy up to $32.”
Stephen Leeb, Ph. D., The Complete Investor, April 2013