Should you swoop in and buy SEEK Limited today?

SEEK Limited (ASX:SEK) could have a potential catalyst for a share price re-rating just around the corner.

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The past year has been a shocker for investors in Australia's leading online employment classifieds business SEEK Limited (ASX: SEK) with the share price down around 18%.

Certainly the underperformance of SEEK compared with the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) which is flat over the last 12 months isn't due to general market negativity towards the technology sector.

In fact, many tech stocks have been flying recently with one of SEEK's closest listed peers Freelancer Ltd (ASX: FLN) up a massive 161% in the last 52 weeks.

Even SEEK's leading fellow classified advertising peers – the real estate focussed REA Group Limited (ASX: REA) and the automotive focussed Carsales.Com Ltd (ASX: CAR) have managed to outperform with share price gains of 11% and 1% respectively.

The underperformance of SEEK would appear to be company specific with investors beginning to question whether its high growth rate can be sustained.

With the share price down, some long-term investors with an eye to seeking out high-quality businesses at reasonable prices could be tempted, however, there is added reason why right now could be the time to take a close look at SEEK…

IPD a potential catalyst

SEEK has previously flagged to investors that an initial public offering (IPO) of the IPD Education business was being considered.

IPD is a global business that has positioned itself to capitalise on continued structural trends of student and labour force migration.

In the 2015 financial year, IPD reported a 13% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) to $52 million. SEEK's share of IPD's net profit after tax was nearly $16 million.

Just last week SEEK announced that it expects the marketing phase for the IPO to commence shortly with a view to a float of the business occurring before the end of this calendar year.

Depending on the valuation which investors place on IPD, this float could lead the market to reassess its overall valuation of SEEK – currently the whole company is being priced by the market at a $4.4 billion market capitalisation – with the IPO acting as a potential catalyst for a share price re-rating.

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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