Groupon Inc. (GRPN) has had a lot of ups and downs since it went public in 2011. But sadly, the downs have far outnumbered the ups.
Pick your ugly moment for GRPN stock — its first-ever earnings report in 2011 that disappointed with a loss and threw cold water on the IPO, the 2012 accounting scandal, angry merchants or the steady grind of problems from competitors like LivingSocial or Scoutmob.
Groupon stock has crashed almost 80% since its aftermarket debut, and more recently GRPN has tacked on 6% in the last year vs. about 12% for the S&P 500 in the same period.
So it really should come as no big surprise that top execs are just as jaded as investors; its CFO Jason Child is joining Jawbone to do their books, instead. This guy was important to GRPN stock, especially considering his great pedigree coming from Amazon.com (AMZN).
It comes at the worst possible time, however, with the company struggling to get its financial footing back under it.
Groupon Fighting a Losing Battle
There are plenty of unfortunate chapters in this narrative of GRPN stock, but this isn’t just a question of headlines. The more important issue is Groupon’s bottom line.
Groupon continues to bleed money, with only a handful of break-even quarters in its history. Revenue is forecast to be painfully flat this year — and that’s only if the company meets expectations.
At the same time, Groupon is going all-or-nothing on its last best hope for growth — a fairly traditional e-commerce site that looks a lot like Amazon and eBay (EBAY).
That makes the departure of CFO Child even more galling.
No, Groupon isn’t going bankrupt anytime soon. There are admittedly some bright spots for the company, including almost $1 billion in cash on the books — about a quarter of the entire market capitalization of GRPN stock — over zero debt.
And while it is impossible to put a price-to-earnings ratio on a stock that has no earnings, the price-to-sales of Groupon is less than 1.5 based on next year’s projected revenue. That’s a heck of a lot more reasonable than some of the other tech companies out there.
But a fair valuation with negativity priced in does not mean the promise of growth. And without the promise of growth, GRPN stock is doomed to stumble around at these levels.
Given the alternatives in tech — or anywhere else — why mess with Groupon?
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.
