Will the SEEK Limited share price keep climbing?

The share price of SEEK Limited (ASX: SEK) finished the day 0.4% higher at $14.41 today, after the leading online employment classifieds operator held its annual general meeting (AGM).

The higher close today takes the gains in Seek’s share price over the past month to around 12%, however, the stock still remains down approximately 16% for calendar year 2015.

At the AGM management reaffirmed guidance which is a key factor in determining the near-term trajectory for the share price.

Here’s what was stated by management:

  • Reaffirmed all guidance statements provided at August 2015 (time of full year results)
  • Reaffirmed reported revenue growth for financial year (FY) 2016 to be in the range of 15% to 18% above FY 2015
  • Reaffirmed earnings before interest, tax, depreciation, amortisation (EBITDA) growth for FY 2016 in the range of 5% to 8% above FY 2015
  • Reaffirmed adjusted guidance for the initial public offering (IPO) of education business IDP and associated interest expense savings that SEEK’s underlying FY 2016 net profit after tax (excluding negative impact of early stage losses) would be approximately $195 million

With the stock commanding a market capitalisation very near $5 billion, the reaffirmed guidance implies that SEEK’s shares are trading on a price-to-earnings (PE) ratio of approximately 25.5 times.

That could be considered a reasonably high multiple and suggest the stock is already priced towards the upper range of what may be considered fair value.

As a cross check, compared against peers such as REA Group Limited (ASX: REA) and Carsales.Com Ltd (ASX:CAR) the PE multiple sits slightly lower than REA’s but above Carsales.Com.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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