Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Priceline.com Inc (PCLN), Expedia Inc (EXPE), Orbitz Worldwide, Inc. (OWW): Invest in This Tourism Leader

Profitable first quarter, weaker long-term trends

Orbitz Worldwide, Inc. (NYSE:OWW) posted a great first quarter 2013, with $1.34 in EPS (as compared to -$.06 for first quarter 2012). Net revenue grew 7% compared to first quarter 2012. Management is pushing the Orbitz Rewards program, which the company anticipates will drive customer loyalty and help Orbitz build a solid base of repeat clients. Orbitz is also focusing on mobile, and it shows – over 25% of their bookings are now done through mobile devices.

Unfortunately, this great earnings report contrasts pretty sharply with the company’s historical profitability – particularly the negative EPS for the past five years. Even earnings before interest, taxes, depreciation, and amortization (EBITDA) has been positive only for two of the past five years (2010-2011), and by little enough that just adding back interest expenses ($44 million and $40 million, respectively) alone reduced earnings to almost zero. At a forward P/E of 16.7, per Morningstar, the stock is comparatively cheap – but that’s because there is a lot of built-in uncertainty. I’m a pretty conservative investor by nature, so I would stay away for now. Wait to see if management has actually turned things around or if this quarter was a fluke before jumping in.

Foolish conclusion

Priceline.com Inc (NASDAQ:PCLN) is far and away your best bet. The company has been growing margins consistently since 2003. Expedia Inc (NASDAQ:EXPE) and Orbitz Worldwide, Inc. (NYSE:OWW) are expanding, but their income statements don’t justify investment to my mind. As the global economic recovery chugs along, all three of these companies could easily be lifted with the tide, but it’s far better to invest in the company that grew earnings even during the global recession of 2008-2010. That’s Priceline.

Michael Douglass owns shares of Priceline.com. The Motley Fool recommends Priceline.com. The Motley Fool owns shares of Priceline.com.

The article Invest in This Tourism Leader originally appeared on Fool.com.

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

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.