Trade Me Group Ltd (ASX: TME) shares are currently priced at around $4.61, almost mid-way between a 52-week low of $3.52 and a 52-week high of $5.70.
It's been a rollercoaster ride for shareholders in 2016, with the share price up 18% year-to-date, down 19% over the past three months and up 10% over the past month.
Trade Me is an online retailer and website operator in New Zealand that combines the functions of selling second-hand goods, cars and houses with a jobs portal, and also selling insurance and advertising.
You could consider a similar Australian business if you combined eBay, REA Group Ltd (ASX: REA) with Carsales.Com Ltd (ASX: CAR), Webjet Limited (ASX: WEB), iSelect Ltd (ASX: ISU), GumTree (owned by eBay) and Seek Limited (ASX: SEK).
Trade Me completely dominates its online market places in New Zealand and the ecommerce market. But analysts wonder how long the company can maintain that dominance, given rivals such as eBay, Amazon and now Facebook with its new offering Marketplace.
Trade Me has already seen off eBay as a viable competitor and is still gaining valuable advertising spend on its sites – which continues to migrate from traditional media sources such as newspapers and free-to-air television.
The big question for many investors is whether Trade Me can continue to generate strong growth in the years ahead.
Moving into Australia to offer a similar product would pit Trade Me against the dominant companies mentioned above – and the company would be highly unlikely to usurp their market leads.
Other countries also have their own established players in most of those fields like new and used cars, housing, general goods including eBay. That suggests that Trade Me is stuck operating in New Zealand, and therefore dependent on growth in the New Zealand economy.
Foolish takeaway
Unless the share price was dirt cheap, I wouldn't be tempted to go near Trade Me. And the share price is not cheap – trading on a P/E of over 22x, with a small, unfranked dividend of 3.7%.
