Priceline.com Inc (NASDAQ:PCLN) Inc is a leader in online travel service, and is very well-known in the U.S. for its “name your own price” feature. What most American investors don’t realize is that Priceline.com Inc (NASDAQ:PCLN) makes most of its money abroad, particularly in Europe. In fact, in 2012 only 8% of the company’s operating income came from the United States. With the stock almost $90 below its 52-week high, is this a buying opportunity, or is most of Priceline.com Inc (NASDAQ:PCLN)’s growth behind it?
About Priceline.com Inc (NASDAQ:PCLN)
Priceline.com Inc (NASDAQ:PCLN) provides a variety of online travel services such as hotels, flights, rental cars, cruises, and more. Priceline.com Inc (NASDAQ:PCLN) works with over 295,000 hotels in over 175 countries in order to offer hotel deals to its customers. As mentioned, Priceline.com Inc (NASDAQ:PCLN) is primarily a European travel service provider. While there are some concerns about the company’s revenues being so dependent on Europe’s fragile economy, the increasing trend toward buying travel services online is making up for any adverse economic conditions.
Growth and Valuation
Priceline is planning to grow using a combination of increasing the services offered and growing its geographic footprint. Priceline has expressed its intention to expand its Asian business, hoping to replicate the success it has had in Europe. In terms of increasing the amount of services offered, Priceline most recently announced its intention to purchase Kayak Software Corp (NASDAQ:KYAK), a leading travel search site.
Analysts seem to think that Priceline will be very successful in growing its revenues in the upcoming years. The company is projected to earn $38.56 per share this year, up from 2012’s earnings of $31.28. The consensus calls for these numbers to grow to $45.98 and $54.53 in 2014 and 2015, respectively, for a three-year average forward earnings growth rate of 20.4%, which is absolutely incredible for such an established market leader such as Priceline.
This kind of growth makes the current P/E ratio of 21.8 seem very reasonable, and perhaps even a little cheap, considering that Priceline has over $4.2 billion in net cash (cash minus debt) on its balance sheet. Think of it this way: after backing out the cash, Priceline trades at less than 11 times 2015’s earnings. And, if the company’s Asia growth plans go well, the double-digit growth should continue for years beyond that.