YELP

We rate YELP INC (YELP) as a Hold with a composite score of 52.4/100 at a current price of $19.51. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in quality (78th percentile) and value (74th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (34th percentile) and momentum (35th percentile) tempers our overall conviction. We assign a Narrow Moat rating (47/100), Low uncertainty, and Standard capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

YELP INC holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 52.4/100 places it at rank #1626 in our full 7,333-stock universe. At $2.0B in market capitalization, YELP INC is a small-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 5%, though momentum at the 35th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 90% (+30.4pp vs sector) narrow to operating margins of 12% (+8.9pp vs sector) and net margins of 10.0%, yielding a gross-to-net conversion rate of 11%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $19.51, YELP INC appears undervalued relative to its fundamentals. Our value factor score of 74/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 8.9x (a 62% discount to the sector median of 23.7x), EV/EBITDA of 7.2x (discounted to peers), P/B of 1.8x, P/S of 0.9x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Low uncertainty rating to YELP INC. The company exhibits strong financial stability with a beta of 0.85, conservative leverage (35% D/E), and a stability factor in the 71th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

We identify no major risk factors at this time. The company's stability factor sits at the 71th percentile with quality at the 78th percentile, both of which support our low-risk assessment. The absence of material leverage, profitability, or volatility concerns reduces the likelihood of a permanent capital loss scenario.

Key risk mitigants include: healthy gross margins of 90% provide a buffer against cost pressures; above-average stability (71th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate YELP INC's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 20.0%, and the balance sheet is managed within acceptable parameters (D/E: 35%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; YELP INC falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, YELP INC receives a Hold rating with a composite score of 52.4/100 (rank #1626 of 7,333). Our quantitative framework assigns a Narrow Moat (47/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 58/100.

Our analysis supports a neutral stance on YELP INC. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.