Aug. 21--Shares of
As things stand, valuations are rich at close to 80 times the current fiscal year earnings per share estimates. Besides, with the company's profitability coming under pressure, there are concerns about the high valuations. Even so, considering the huge business potential in the e-commerce space, and the high valuations being commanded by even unprofitable firms, most analysts are not complaining about valuations. Besides, given the current investor interest in the e-commerce space, investors may well be able to cash out at a premium.
In Justdial's case,
The other factor driving up Justdial's valuations is peer group transactions. With recent stake sales at online retailers happening at well over one time the gross merchandise volume (GMV), analysts say Justdial also deserves to be valued at such a premium.
It's important to note that Justdial's marketplace business is still in the nascent stages. The majority of the company's revenues and earnings still come from the search business. But considering that the company's core business generates enormous leads, many believe it can immensely benefit from offering value added services like Search Plus and market place. The expectation is driving up the stock valuations.
While transactions like Flipkart's fund-rising are giving a boost to valuations, a quick and profitable scale-up of the new business will be critical for the sustainability of the positive momentum in the Justdial stock.