The SEEK Limited (ASX: SEK) share price may have been one of the better performers on the market on Monday, but things have certainly taken a turn today.
At the time of writing the job listings company's shares are down over 4% to $19.65.
What happened?
Whilst the market and the brokerage community as a whole appear to agree that SEEK delivered a strong half-year result yesterday, its current valuation seems to be dividing opinion.
For example, a broker note out of the Macquarie Group Ltd (ASX: MQG) equities desk reveals that its analysts have downgraded SEEK from an outperform rating to neutral largely on valuation grounds. The broker has a price target of $20.35 on its shares.
Elsewhere, Deutsche Bank has retained its hold rating on SEEK's shares and increased their price target from $17.90 to $18.10, which is still significantly lower than its current share price.
And finally, a note out of UBS reveals that its analysts have not been swayed by yesterday's result. They have retained their sell rating and $16.00 price target. The broker likes the company, but thinks it is expensive and is holding out of for a better entry price.
Is it expensive?
Based on Macquarie's forecast for earnings per share of 61.1 cents in FY 2018, SEEK's shares are changing hands at approximately 32x trailing earnings.
Whilst this is by no means cheap, I wouldn't say it is astronomically expensive compared to the rest of the information technology industry.
Furthermore, I think SEEK has strong long-term growth potential that makes it deserving of such a premium.
As well as being a market-leader in the ANZ region, it has a China-based business leading the way in a market which could be many, many multiples bigger than the Australian market. So much so, I think this business alone has the potential to help SEEK deliver above-average earnings growth over the long-term.
Overall, I maintain my view that SEEK would be a great buy and hold investment option for investors willing to hold on for the long-term, and a far better option than the struggling Freelancer Ltd (ASX: FLN).