IAC (IACI) recently delivered a big first quarter earnings beat on rising revenue and expanding profit margins. Since the Q1 report, analysts have risen their estimates significantly higher for both 2013 and 2014, sending the stock a Zacks Rank #1 (Strong Buy).
Analysts also project strong growth for IAC over the next couple of years. Despite this, shares trade at just 13x forward earnings, well below their historical multiple.
IAC is an internet company with more than 150 brands and products focused in the areas of search, applications, online dating, local and media. Its portfolio of websites includes Ask.com, About.com, Match.com, HomeAdvisor.com and Vimeo.com.
Big Q1 Beat
IAC reported strong first quarter results on April 30. Earnings per share came in at 74 cents, well ahead of the Zacks Consensus Estimate of 53 cents.
Revenue rose 16% to $742.2 million, marking IAC's 13th consecutive quarter of double-digit revenue growth. The 'Search & Applications' segment saw top-line growth of 16% while Match.com rose 8%.
Meanwhile, operating income before amortization soared 24% as the operating margin expanded 90 basis points to 15.2% of revenue.
Rising Estimates
Earnings estimates have risen sharply for IAC since the company's big Q1 beat. The Zacks Consensus Estimate for 2013 is now $3.41, up from $3.00 before the report. And the 2014 consensus has risen from $3.76 to $4.08 over the same period.
This strong earnings momentum recently sent shares of IAC to a Zacks Rank #1 (Strong Buy). The Zacks Industry Rank for IAC also shows promise. The 'Internet Commerce' industry is ranked in the top 8% of all industries.
Growth at a Reasonable Price
Analysts project strong growth from IAC over the next couple of years. Based on current consensus estimates, analysts expect 80% EPS growth this year and 20% growth next year.
Despite this, shares trade at just 13x 12-month forward earnings, well below its 10-year median forward multiple of 23x.
Based on a consensus 5-year EPS growth rate of 16.6%, IAC's PEG ratio is an attractive 0.8.
The Bottom Line
With strong earnings momentum, attractive growth prospects and reasonable valuation, IAC offers investors a lot to like.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.