This Travel Service Provider Is The Best, Hands Down: Priceline.com Inc (PCLN)

Published on February 12, 2013 at 1:00 pm by The Motley Fool in News

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Priceline’s main competition is in the form of Expedia Inc (NASDAQ:EXPE) and Orbitz Worldwide, Inc. (NYSE:OWW). Expedia (which includes Hotwire and Hotels.com) actually leads Priceline as the most visited travel website in the U.S. with 14.23% of all traffic to Priceline’s 11.62%. Orbitz only gets 5.84%, and both of these competitors lag Priceline in both international exposure and revenue growth (see charts below).

Expedia currently trades at 20.9 times 2012’s earnings, with a forward earnings growth rate of 15% projected for the next three years. Orbitz, by far the smallest of the three companies market-cap wise, trades at 14.5 times earnings, and growth estimates vary wildly, from a 75% year-over-year decline to a 100% annual gain. When you combine that uncertainty with the fact that the company has over $300 million in net debt (more than their market cap!), and Orbitz looks like a spec play at best.

Priceline trades at the highest multiple of the three at 22.5 times 2012’s earnings of $30.91 per share, but for good reason. The company is expected to produce earnings of $37.45 and $44.23 in 2013 and 2014, respectively, for annual growth of 21.2% and 18.1%. Not only is this an incredible growth rate for the valuation, but the company also has the most attractive balance sheet of the three with almost $5 billion in cash and equivalents with no debt. The company also recently announced a $200 million share buyback plan, which should add even more value to the shares.

The bottom line is that Priceline is clearly the best-in-breed in the travel sector. If they have even half of the success in Asia as they have in Europe, the earnings projections mentioned above will prove to be very conservative indeed!

The article This Travel Service Provider Is The Best, Hands Down originally appeared on Fool.com and is written by Matthew Frankel.