Inc (PCLN): How Does It Stack Up?

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Priceline is the best of breed player in the online travel agency space due to the company’s excellent execution and greater exposure to faster international markets.


This is where investors may roll their eyes. How can a stock selling at over $750 be cheap? But ignore the price tag and dig into the metrics. Inc (NASDAQ:PCLN)’s poor stock performance last year has allowed the company’s earnings to catch up with the stock price. Priceline trades at 16 times next year’s earnings which given the company’s 22% EPS growth rate gives the stock a reasonable 0.70 PEG ratio. Of the companies I cover, this is one of the lowest.

Priceline’s valuation starts to look even better when compared to peers. Expedia trades at nearly the same forward earnings multiple at 15 times next year’s earnings but given the stock’s significantly slower 18% EPS growth rate, it looks more expensive on a PEG basis. Given Expedia’s slower growth, that doesn’t make any sense.

Foolish bottom line Inc (NASDAQ:PCLN) also has a great catalyst in last year’s $1.8 billion acquisition of Kayak Software, which operates a series of travel applications  While some are concerned that Priceline overpaid, the acquisition gives Priceline access to an enormous amount of data that will allow the company to improve its search results and increase revenues. This gives the company a competitive advantage against Expedia or Orbtiz.

Robert Baillieul has no position in any stocks mentioned. The Motley Fool recommends The Motley Fool owns shares of

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