Although the S&P 500 is down 3.3% over the past six months, Vimeo’s stock price has fallen further to $4.22, losing shareholders 13% of their capital. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.

Is now the time to buy Vimeo, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Even with the cheaper entry price, we're swiping left on Vimeo for now. Here are three reasons why VMEO doesn't excite us and a stock we'd rather own.

Why Is Vimeo Not Exciting?

Originally launched in 2004 as a platform for filmmakers seeking a high-quality alternative to YouTube, Vimeo (NASDAQ:VMEO) provides cloud-based video creation, editing, hosting, and distribution software that helps businesses and creators make, manage, and share professional-quality videos.

1. Revenue Tumbling Downwards

We at StockStory place the most emphasis on long-term growth, but within business services, a stretched historical view may miss recent innovations or disruptive industry trends. Vimeo’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 1.9% over the last two years.Vimeo Year-On-Year Revenue Growth

2. Fewer Distribution Channels Limit its Ceiling

With $417 million in revenue over the past 12 months, Vimeo is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.

3. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Vimeo’s revenue to rise by 2.1%. Although this projection suggests its newer products and services will catalyze better top-line performance, it is still below the sector average.

Final Judgment

Vimeo isn’t a terrible business, but it doesn’t pass our quality test. Following the recent decline, the stock trades at 17.6× forward EV-to-EBITDA (or $4.22 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at one of our all-time favorite software stocks.

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