Is Inc (PCLN) a Cash King?

Priceline has also been aggressive in responding to challenges from its domestic competitors. Soon after Expedia spun off TripAdvisor, Priceline purchased travel search engine Kayak, which gave it access to valuable consumer data and may help prevent Expedia, TripAdvisor, and Orbitz from grabbing too much market share

The cash king margin can help you find highly profitable businesses, but it should only be the start of your search. The ratio does have its limits, especially for fast-growing small businesses. Many such companies reinvest all of their cash flow into growing the business, leaving them little or no free cash, but that doesn’t necessarily make them poor investments. Conversely, the formula works better for slower-growing blue chips. You’ll need to look closer to determine exactly how a company is using its cash.

Still, if you can cut through the earnings headlines to follow the cash instead, you might be on the path toward seriously great investments.

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Jim Royal has no position in any stocks mentioned. The Motley Fool recommends and owns shares of, McDonald’s,, and TripAdvisor.

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