Australian James Packer’s firm Cavalane Holdings have reportedly bought a 9.4% stake in Zillow Inc. (NASDAQ:Z) to become the second largest shareholder at Zillow. The move comes as a surprise considering the huge gains the stock has experienced this year. The stock has gained over 260% in the year-to-date and seems highly overpriced considering the fact that the company hasn’t seen profits and earnings to justify the huge gains. The PE ratio of this firm is infinitely high since it hasn’t made consistent profits in the last four quarters. Considering that Zillow is a growth firm, let’s look at the stock price through another metric, the price-to-sales ratio. The last twelve month price to sales ratio of Zillow is currently at 25, which is way too high even for a high growth company. To put things in perspective Amazon, one of the fastest growing companies by revenues has a last twelve months Price-to-sales ratio of 1.44 against Zillow’s 25. This metric also suggests that the Zillow stock is highly overvalued in the market and it may only be a matter of time before the stock price may undergo a correction to bring the price to more realistic levels. This would ideally be the time when long term investors would look to book profits rather than going in for further investing in this stock and this move from James Packer is baffling. The stock which had seen a 1.42% rise in the last trading session is down 3% in pre-market trade from its Wednesday close at $100.50.
To see Zillow’s latest stock price movement, click here (NASDAQ:Z)
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