Why LNKD Is So "Special"

Over the last six-months LinkedIn Corp LNKD is up 30 percent while Facebook Inc FB is up 18 percent and Twitter Inc TWTR, Yelp Inc YELP and are all down (negative returns). So what makes LNKD in so special?... 1 We can see a 10x of revenue in just five year, growing from $200M (TTM) to now over $2B (TTM). In the next chart, still remaining myopic to LNKD, let's add cash from operations to the chart above in the red line. 2 As revenue have increased to 10x, cash from operations has increased even more, going from $46M (TTM) to now $521M (TTM). There's no doubt, LNKD has realized enormous growth. Now let's turn to some peer comps. The chart below plots revenue for LNKD vs TWTR and YELP. 3 We can see that LNKD's trajectory is about the same as TWTR (exponential) but the numbers are simply larger. While we're at it, let's plot this same peer group with cash from operations as the focus. 4 It's this image where we begin to see the vast difference between these three firms. LNKD is driving cash from operations, YELP and TWTR are trivially positive compared to LNKD. If we want to look forward, we can examine these peers with respect to expenditures in research and development (R&D). 5 LNKD exhibits a healthy and linear increase since 2012. TWTR's spend is massive and wildly exponential of late. I have written about TWTR's bet on R&D extensively. Next let's broaden the peer group to include all Internet Software & Services companies with market caps above $5B and examine gross margin % on the y-axis and total revenue growth, one-year on the x-axis. 6 While LNKD shows a robust 45%+ revenue growth Y-O-Y, it has the highest gross margin % of any Internet Software & Services company in North America in this market cap range. I have highlighted some other high profile names (FB, TWTR, BABA, GOOGL), though certainly some of them are in quite different businesses than LNKD. In our final chart I want to examine valuation. Let's plot market cap on the x-axis and Price to Sales on the y-axis and only examine FB, TWR, YELP and LNKD. 7 We find that LNKD has the lowest price to sales ratio relative to these peers. So what do we have?... A firm that has outperformed all peers in the last six months, has realized 10x revenue over the last five years and 11x cash from operations, maintains a healthy R&D spend has the highest gross margin % of any firm in its industry (above $5B in market cap) and a relatively low valuation. What makes LNKD “special?” Copy and paste the above paragraph.

Let's take a look at seven different visuals with various peer groupings and I'll show you where LNKD is different from everyone else.

In our first chart, we'll stay myopic to LNKD, and we can examine the firm's revenue trend.