Wednesday, October 28, 2009

Wall Street agrees with you, Carol! (YHOO)

At today's investor event, Yahoo's (YHOO) new CEO Carol Bartz called the company's 6% operating margin "pathetic." She went on in an apologetic manner, describing a "beginning of a journey back to respect."

Activist investor Carl Icahn - still WAY underwater on his YHOO investment - just resigned from the company's board of directors, but re-iterated his total confidence in Bartz at the helm.

I would agree with Carol that the company's 6% operating margin is unacceptable, especially with their still-high 58% gross profit margin.

Taking a look at other companies with 6% operating margins shows that YHOO is already afforded "privileged status" on its way back to loftier profits -->> these other firms trade at Price-to-Sales ratios of 1.88, versus Yahoo at 3.58. Yahoo's underperformance versus Google is further exemplified by their respective P/S differences - Google's is 7.5, thanks to its big operating margin near 30%.


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