Priceline.com Inc (PCLN): Does It Pass Warren Buffett’s Test?

Expedia has also consistently grown its ROIC over the past five years, but its returns are only a small fraction of those offered by Priceline.com Inc (NASDAQ:PCLN). While Expedia’s current returns are much higher than they were five years ago, they’re down from last year. Ctrip.com’s returns on invested capital are the lowest of the listed companies, and its returns have consistently declined over the past five years as invested capital soared. ROIC at Orbitz finally seems to have perked up after year of malaise.

Priceline.com Inc (NASDAQ:PCLN) has grown impressively over the past few years and has remained resilient as consumer spending has decreased because of the recession. Part of its resilience may be attributed to its extension into international markets, in which it has seen considerable success. In fact, Priceline has even managed to compete effectively in China against Ctrip as it works to take advantage of the growing middle class there. Priceline also managed to negotiate a partnership with Ctrip that gives both companies access to the 235,000 hotels listed in Booking.com.

On the domestic front, Priceline.com Inc (NASDAQ:PCLN)’s acquisition of Kayak may help it compete more effectively with Expedia, Orbitz, and Tripadvisor Inc (NASDAQ:TRIP) because of the access to consumer data it gained through Kayak.

Businesses with consistently high ROIC show that they’re efficiently using capital. They also have the ability to treat shareholders well, because they can then use their extra cash to pay out dividends to us, buy back shares, or further invest in their franchise. And healthy and growing dividends are something that Warren Buffett has long loved.

The article Does Priceline.com Pass Buffett’s Test? originally appeared on Fool.com.

Jim Royal has no position in any stocks mentioned. The Motley Fool recommends Ctrip.com International, priceline.com, and TripAdvisor and owns shares of Ctrip.com International, Priceline.com, and TripAdvisor.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.