2. Compared to earnings, none of these companies are what I would call “overvalued,” although Travelzoo is the cheapest.
3. The PEG ratio is a prediction of future growth that takes into account valuation and current earnings. In theory, a PEG ratio of 1.00 equals fair value (only with earnings). As you can see, both Priceline and Travelzoo Inc. (NASDAQ:TZOO) are considered “fair value,” although I do wonder where the next five years of explosive growth comes from for Priceline.
4. The price/sales is a company’s value compared to sales, and Expedia Inc (NASDAQ:EXPE) is by far the cheapest. This is encouraging for both Travelzoo and Expedia because it suggests that minor changes could be implemented to improve margins and ultimately boost earnings.
5. Priceline, with operating margins of 35.16%, leads me to wonder the upside for margin growth. Expedia and Travelzoo still have room to grow margins, especially Expedia Inc (NASDAQ:EXPE). As a result, I give the nod to Expedia due to its potential to grow margins and its cheapness relative to sales. Travelzoo has the same upside to a lesser degree, and Priceline appears to be operating with such efficiency and is so large that I believe the upside is less.
It is not uncommon for fundamentals to cause you to change your mind about an investment. In regards to Travelzoo Inc. (NASDAQ:TZOO), I still have the same problems outlined in my first article, but I do believe that the company is fairly valued and find its 5% growth last quarter and its 7% growth this quarter as progress. Furthermore, I find its margin growth highly encouraging, and now with it trading around $24, I would look closely at its upside from this point.
The article Has this Online Travel Company Turned the Page? originally appeared on Fool.com and is written by Brian Nichols.
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