RS Investment Management (Trades, Portfolio) is betting big on LendingTree Inc. (TREE, Financial), acquiring 694,050 shares in the first quarter.
LendingTree provides consumers with access to product offerings from over 400 active lenders, including mortgage loans, home equity, reverse mortgage, auto loans, credit cards, personal loans, student loans and small business loans and other related offerings. The company also offers tools and resources, including free credit scores, that facilitate comparison shopping for these loans and other credit-based offerings.
LendingTree seeks to match consumers with multiple lenders who can provide them with competing quotes for the products they seek. LendingTree offers consumers access to a broad array of credit-based offerings directly from multiple lenders rather than just multiple quotes from the same lender or indirectly through intermediaries. This is where the company believes it has a strong differentiation advantage against its competition.
LendingTree has a market cap of $955.01 million, an enterprise value of $780 million, a P/E ratio of 21.36, a P/B ratio of 4.62 and a quick ratio of 3.71.
LendingTree is also traded in Germany.
It is likely that RS Investment bet big on LendingTree in the first quarter for the following reasons;
- LendingTree's founder, CEO and chairman is Douglas Lebda. In 1996, Lebda founded LendingTree. He currently owns 1,710,069 shares in the company which is 14.39% of the shares outstanding. Lebda has shown leadership as well as the ability to execute when LendingTree had a successful IPO in 2000. Lebda was also able to lead the company through the dot-com meltdown of 2001 and execute a successful sale to IAC/InterActiveCorp on May 8, 2003. IAC/InterActiveCorp is a global leader in leading media and is comprised of some of the world's most recognized brands and products. These brands include HomeAdvisor, Vimeo, About.com, Dictionary.com, The Daily Beast, Investopedia and Match Group’s online dating portfolio, which includes Match, OkCupid and Tinder.
- LendingTree has been able to pay back all of its long-term debt. According to LendingTree 10-K SEC filing from Feb. 28, 2011:Â "As of Dec. 31, 2010, LendingTree Loans had two committed lines of credit totaling $150.0 million of borrowing capacity. LendingTree Loans also has a $25.0 million uncommitted line with one of these lenders. Borrowings under these lines of credit are used to fund, and are secured by, consumer residential loans that are held for sale. Loans under these lines of credit are repaid using proceeds from the sales of loans held for sale by LendingTree Loans."Â LendingTree was able to successfully pay back its debt, which may have influenced RS Investment Management (Trades, Portfolio) to increase its stake sixfold.
- LendingTree has excellent financial strength according to GuruFocus with a 9/10 Financial Strength rating with no debt and an interest coverage of 109.97%. This ranks the company above 95% of the 1,565 companies in the Global Specialty Finance Industry.
- LendingTree has reported excellent increases in multiple areas of its financial results over the previous 12 months. Revenue growth (56.10%), EBITDA growth (158.10%), operating income growth (209.20%), free cash flow growth (143.10%) and book value growth (96.80%).
LendingTree has a few noteworthy severe warning signs.
- LendingTree's short interest is high according to GuruFocus; 60.89% of the float is shorted. Float percentage of total shares outstanding is the percentage of float shares relative to the total shares outstanding. As of today, LendingTree's float percentage of total shares outstanding is 44.99%.
- The company's financial results also may have been manipulated according to GuruFocus. LendingTree has a Beneish M-score of -1.22, which implies that it is manipulating its financial results.
Below is a Peter Lynch Chart for LendingTree.
RS Investment Management (Trades, Portfolio) serves a global and diverse client base including financial advisors, retirement plans, individual investors, and institutions, endowments and foundations. RS Investment Management (Trades, Portfolio) was founded in 1986, and it currently owns 377 stocks with an estimated value of $10.1 billion.
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