Daily Gains Letter

Three Alternatives to One of My Best Stock Picks Since 1999

By for Daily Gains Letter |

Saving on Cost Isn't a Good Thing in This SectorThe airline sector is flying higher, as the global economy strengthens and income levels in the emerging markets steadily improve, based on my stock analysis.

Yet unlike what you or your parents might have done when booking a vacation decades ago, we are now seeing a massive migration of travellers looking to the online space to book their next flight.

While there are numerous operators in the Internet travel space, the “Best of Breed” and the company that started it all is The Priceline Group Inc. (NASDAQ/PCLN). I distinctly recall reviewing this company in late 1999 and recommending it at under $20.00. Since then, the stock has been one of my top performers, as it currently trades at more than $1,200 per share and has a market cap of roughly $67.0 billion.

The price of the stock puts it out of the reach of many investors, but the company deserves its place at the top of the online travel segment, based on my stock analysis. Priceline has superior growth metrics and a comparative valuation to its peer group, which makes it the market leader and a top investment opportunity.

Priceline.com Chart

Chart courtesy of www.StockCharts.com

Now, if you cannot afford the high stock price of Priceline, then there are several companies that I view as the next best opportunities in this market space.

The second leading online travel company, based on my stock analysis, is Expedia, Inc. (NASDAQ/EXPE). This stock is still large, but it has a market cap that’s approximately seven-times smaller than Priceline. The valuation of Expedia is also more attractive at 16.47 times (X) its 2015 earnings per share (EPS) and 1.94X trailing sales, versus 19.60X and 9.40X, respectively, for Priceline, as my stock analysis indicates.

Expedia Inc Chart

Chart courtesy of www.StockCharts.com

For those of you looking for more risk in this space, my stock analysis suggests you take a look at Orbitz Worldwide, Inc. (NYSE/OWW) and Travelzoo Inc. (NASDAQ/TZOO). While these two companies are much smaller and lower in price than Priceline, their growth rates are inferior, as my stock analysis indicates.

Take a look at the table below of the comparative revenue growth rate, based on data from Thomson Financial.

 2014 2015
Priceline 24.80% 20.60%
Expedia 18.40% 12.30%
Orbitz Worldwide 8.00% 5.00%
Travelzoo -1.60% 6.10%

 

You can see the top-end growth of Priceline versus Expedia and the two smaller companies is significantly higher. This is why Priceline is at the top of its class, based on my stock analysis.

The chart of Priceline below shows the superior performance of this stock versus the other three stocks.

Priceline.com Inc Chart

Chart courtesy of www.StockCharts.com

As these four stocks in the online airline/travel space suggest, when evaluating and comparing companies in the same industry, it’s not always about the stock price, but also the underlying fundamentals and growth projections.

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