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Stock Analysis: Vimeo (NASDAQ: VMEO)

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About Vimeo

Can we just call Vimeo what we bluntly assume it to be?

A poor man’s YouTube.

While this isn’t the most unbiased way to kick off a stock analysis article, it’s pretty much the truth of the matter from where we stand.

Even if this happens to be the case, Vimeo is still a solid video streaming platform with plenty of market share, as some peg the company as the third largest video streaming platform out on the market.

We’ll give credit where credit is due.

For those who aren’t as in tune with what Vimeo actually is, it is basically a streaming platform where long-distance friends or well established companies and other types of groups and organizations can get together virtually and perhaps host meetings, concerts, sporting events, seminars and ultimately share content with one another simultaneously in the digital world.

In all of this lies the root of how the company makes money; its subscription packages.

These packages are predominantly concentrated in offering software (yes, this company ultimately runs a SaaS model) where users can implement special effects and employ other editing through Vimeo’s offered tools.

As seen through the company’s current subscription plans, Vimeo has your back when it comes to editing videos, setting up and hosting events, obtaining tangible metrics that can be used to better one’s production and some more features that are valuable to those that already have or even wish to develop a better media following.

Sitios populares para compartir vídeos - Marketing Analítico

Now that some of the groundwork regarding Vimeo has been laid, we guess it is a little different than YouTube in certain aspects, and for that we say sorry to our friends at Vimeo.

Let’s pretend that the apology was accepted and let’s get on with this stock analysis article on the company and its core financials.

Vimeo’s stock financials

Trading at a lowly share price of $3.54 with a market capitalization of $586.77 million without paying out an annual dividend as well as having no readily listed price-to-earnings (P/E) ratio, Vimeo’s stock (NASDAQ: VMEO) is off to relatively neutral start, as the main piece of information we’ve gathered from this is the fact that it is a smaller company (compared to other companies we’ve analyzed in past stock analysis articles) and also likely able to be net profitable on an annualized basis but likely opts to not be so as to consistently reinvest its earnings back into the business and its software, which we don’t mind.

Skipping over to the company’s balance sheet, Vimeo’s executive team is in charge of $605 million in total assets along with $252 million in total liabilities.

Honestly, we didn’t initially expect the company’s balance sheet to be in such decent shape, as we presumed its total liabilities would be much closer to the amount of its total assets given the intense amount of investment and reinvestment necessary to stay ahead of the technology curve.

We tip our hats to you, Vimeo.

Well done with keeping your total liabilities tamed well below your total assets.

As it pertains to the company’s income statement, Vimeo’s total annual revenue since 2019, on a year-over-year (YOY) basis, standing at around $196 million in 2019 and has since risen to its latest reported figure (according to TD Ameritrade’s platform) of $433 million, in 2022.

Obviously, this is some pretty good, sustainable growth, indicating that the company has been able to continue successfully tapping onto and retaining new customers and enterprise clients that are trying to stay abreast in the deep and wide world of social media.

Onto the company’s cash flow statement, as expected, Vimeo has been experiencing some cash burn (through its net income figures) over the same timeframe, remaining generally between -$79.6 million (2022) and -$50.6 million (2020).

While this isn’t by any means the end of the world, it should be deeply considered that Vimeo only has around $274 million in cash (according to the balance sheet) which may seem like a lot, but if the cash burn becomes untamed (which it easily could) or simply lasts too long, this company could get upside down (i.e., have more total liabilities than total assets) in a short period of time.

Videoconferencia, todo lo que necesitas saber para utilizarla

As long as Vimeo’s leadership roster is filled with a few good financial engineers and stewards, the company should be fine in the long run, however, it should be understood that it really wouldn’t take all that much to dig this company into an insurmountable hole.

Vimeo’s stock fundamentals

On the profitability front, the company’s trailing twelve month (TTM) net profit margin, according to TD Ameritrade’s platform, is -18.38% compared to the industry’s average of 17.72%.

Whoopee.

Being among the largest video streaming platforms in the world and still having a deeply negative TTM net profit margin doesn’t get us excited about the prospects of considering investing in this company’s stock (NASDAQ: VMEO).

At all.

Yes, it is an encouraging sign that this company’s total annual revenue has been on a steady ascent, however, for being a relatively seasoned company (founded in 2004), having this poor of a current TTM net profit margin is far from confidence invoking from a potential investor’s perspective.

When it comes to the company’s TTM returns on assets and investment(s), both of Vimeo’s respective figures lag well behind the industry’s averages, also according to TD Ameritrade’s platform.

Specifically, the company’s TTM returns on both assets and investment(s) stand at -12.69% and -20.84% to the industry’s respective averages of 14.25% and 17.27%.

This is quite a ways away from being on par with the industry’s averages in these key metrics.

Should you buy Vimeo stock?

For those who have seen a few episodes of ABC’s Shark Tank, famed and outspoken Canadian investor Kevin O’Leary sometimes likes to refer to an entrepreneur’s business as “poo poo on a stick” and other times he likens them and/or their business model to a cockroach that deserves to get crushed.

While we don’t think Vimeo deserves to get crushed or that the premise of its business is necessarily poo poo on a stick, it is a very real possibility that Alphabet (the parent company of Google and YouTube) could effortlessly penetrate this space and in a not-so-distant future, completely obliterate Vimeo to the point of it not being to survive anymore.

TAYA KYLE, KEVIN O'LEARY AND AMY PURDY JOIN MISS AMERICA'S CELEBRITY ...

Pictured above is Kevin O’Leary

Additionally, the fact that those at the helm of YouTube have opted to not deepen their presence in the space speaks volumes that they view it not as a fruitful venture, implying that Vimeo’s line of business just isn’t that profitable or worth diving into headfirst.

If the situation were different, we might’ve gone on a brief tangent about how Alphabet might want to consider acquiring Vimeo, however, we don’t think this company is worth paying for as Alphabet is doing just fine as is.

While Vimeo has relative market share, a growing (according to its recent revenue figures) business and a good balance sheet, this company’s other financial figures just aren’t compelling enough to put it over the finish line to warrant us even giving it a “hold” rating, as its comparable returns metrics are too far from the competition’s averages, its TTM net profit margin isn’t close to being competitive and the margin of error relating to its cash burn and cash on hand isn’t favorable either, as discussed in previous paragraphs.

We give Vimeo’s stock (NASDAQ: VMEO) a “sell” rating.

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.

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