Up until the financial crisis, long-time investors knew not to trust Ctrip’s (CTRP) management when they provided guidance of 25% growth. Inevitably, the company produced earnings and revenue growth well in excess of 25%. In its most recent quarter, Ctrip seems to have resumed its phenomenal growth. For its fiscal third quarter, the company produced net revenue growth of 47% on a year-over-year basis. Excluding the impact of the ezTravel acquisition, net revenues grew at a 40% year-over-year rate. Earnings growth was even more impressive, growing 80% on a year-over-year basis to $28 million.
In a recent post, I estimated a value for Ctrip at $66 per share assuming 25% growth for five years declining to 15% by year 10 and assuming a 10% discount rate. I hesitate to model growth higher than 25%, but obviously Ctrip is worth much more if they can sustain 40% growth. It’s amazing that after one quarter $66 per share doesn’t seem all that expensive. I’ll continue to wait for a reasonable margin of safety relative to this value.
Disclosure: I do not hold shares of Ctrip