Priceline (PCLN)

Priceline looks promising:

• Another high earnings grower like OPEN and NFLX - as expected, growth is declining. It's just tough to maintain such a high flying-growth rate - 55% for year-end Dec 2010 vs 33.6% for year-end Dec 2011.
• This is just plain cheap on earnings (using yesterday's close of $415.99) - trading at 31.5 times the 2010 EPS estimate which is a dirt cheap 0.57 times 2010 growth
• To give only a 10% upside from these levels, Priceline only needs to trade at 0.63 times the 2010 growth rate.

The 2010 earnings report is not far off, 2/4/11, so we should also take a closer look at how this stacks up against the 2011 estimates.

• PCLN is currently trading at 23.6 times 2011 estimates, which is still much less than 2011 growth, only 0.7 times the 33.6% rate.
• Looking at a 10% upside, Priceline only needs to trade up to 0.77 times the 2011 growth rate.

Of the 3 high growers, PCLN looks much cheaper than either OPEN or NFLX. I'm likely to go long on this one and will let you know when it happens.

Netflix (NFLX)

Not thrilled about Netflix:

• Growth is declining - 40.9% for year-end Dec 2010 vs 37.6% for year end Dec 2011. But not a huge issue with that, 37% is still pretty darn good
• Somewhat expensive at yesterday's close of $178.41 - trading at 63.9 times 2010 EPS estimate, but my bigger concern is that 63.9 is 1.56 times the 2010 growth
• Netflix would need to trade up to about 1.7 times the 2010 growth to offer a 10% upside - getting too close to the double growth rate multiple I want to avoid

No go for NFLX. If I'm looking at high-growth stocks, I still like OPEN better which I wrote about yesterday.

Open Table (OPEN)

Open Table is interesting:

• The growth rate is declining - 106% for Dec 2010 vs 54.4% for Dec 2011. But c'mon man, it was growing over 100%! Tough to hold that against it.
• Not expensive at all at current price of $70.65 - yes, it's trading at 103.9 times the 2010 EPS estimate, but that's 106% growth, so it's still trading at slightly under 1 times the 2010 growth rate.
• Open Table only needs to trade at 1.07 times 2010 growth to give a 10% upside from here - still cheap. If it could trade 1.25 times growth, we're looking at a near 19% upside.

As I'm looking for opportunities as far away from double the growth rate as possible, this fits. Some other things I'm considering before jumping in:

• 2010 earnings report on Feb 7th - not that far away and I typically like to stay out (or be out) of trades when the report hits.
• Since 2010 earnings is so close, the 2011 earnings outlook may be more relevant - to get the same 10% upside referenced above, OPEN needs to trade at 1.36 times 2011 growth. Yes, that still looks cheap, but still higher than the 1.07 above.
• Also want to analyze a couple other high-growth stocks, Netflix and Priceline.

Definite maybe to go long on OPEN - I'll keep you updated.