Vimeo’s stock price has taken a beating over the past six months, shedding 38.2% of its value and falling to $4.01 per share. This might have investors contemplating their next move.
Is now the time to buy Vimeo, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Vimeo Not Exciting?
Even with the cheaper entry price, we're swiping left on Vimeo for now. Here are three reasons why there are better opportunities than VMEO and a stock we'd rather own.
1. Revenue Tumbling Downwards
Long-term growth is the most important, but within business services, a stretched historical view may miss new innovations or demand cycles. Vimeo’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 1.5% over the last two years. 
2. Fewer Distribution Channels Limit its Ceiling
With $415.1 million in revenue over the past 12 months, Vimeo is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.
3. Previous Growth Initiatives Have Lost Money
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Vimeo’s five-year average ROIC was negative 17.7%, meaning management lost money while trying to expand the business. Its returns were among the worst in the business services sector.
Final Judgment
Vimeo isn’t a terrible business, but it doesn’t pass our bar. After the recent drawdown, the stock trades at 22.1× forward EV-to-EBITDA (or $4.01 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - you can find more timely opportunities elsewhere. We’d recommend looking at the most entrenched endpoint security platform on the market.
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