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Summary

  • The company is fairly valued based on 2015 earnings estimates and earnings growth potential.
  • The financial efficiency ratios have retreated a bit but are still excellent.
  • The company reported first-quarter earnings which beat estimates on the top and bottom lines.

The last time I wrote about Priceline Group Inc. (NASDAQ:PCLN) I stated, "Due to the bullish technicals, excellent financial efficiency ratios, and excellent earnings growth prospects I will be pulling the trigger here right now." Since the last article, it dropped 1.87% versus the 1.34% gain the S&P 500 (NYSEARCA:SPY) posted.

On 8th May '14, the company reported first-quarter earnings of $7.81 per share, which beat the consensus of analysts' estimates by $0.88. In the past year, the company's stock is up 49.43%, and is beating the S&P 500, which has gained 15.21% in the same time frame. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial and technical basis to see if it's worth buying more shares of the company right now.

Fundamentals

The company currently trades at a trailing 12-month P/E ratio of 31.92, which is expensively priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 18.66 is currently fairly priced for the future in terms of the right here, right now. The 1-year PEG ratio (1.4), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is fairly priced based on a 1-year EPS growth rate of 22.77%. The company has great near-term future earnings growth potential with a projected EPS growth rate of 22.77%. In addition, the company has great long-term future earnings growth potential with a projected EPS growth rate of 19.87%. Below is a comparison table of the fundamental metrics for the company for when I wrote all articles pertaining to the company.

Article Date

Price ($)

TTM P/E

Fwd P/E

EPS Next YR ($)

Target Price ($)

PEG

EPS next YR (%)

24Apr14

1231.01

33.88

19.08

64.52

967

1.45

23.32

24May14

1197.12

31.92

18.66

64.14

962

1.4

22.77

Financials

On a financial basis, the things I look for in general are the dividend payouts, return on assets, equity and investment. The company does not sport a dividend to speak of, but is sporting return on assets, equity, and investment values of 19.0%, 30.0% and 22.8%, respectively, which are great values. In this particular instance, I will forego the dividend aspect of the financials because the stock is in my growth portfolio; and in the growth portfolio, a stock does not have to have a dividend.

The really high return on assets value (19%) is important because it is a measure of how profitable the company is relative to its assets, telling us how efficient a management team is at using its assets to generate earnings (for comparison purposes, Priceline has the third highest ROA in the large cap business services sector behind by McGraw-Hill Financial, Inc. (NYSE:MHFI) which sports an ROA of 27% and Moody's Corp. (NYSE:MCO) which sports an ROA of 20.5%). Below is a comparison table of the financial metrics for the company for when I wrote all articles pertaining to the company.

Article Date

Yield (%)

Payout TTM (%)

ROA (%)

ROE (%)

ROI (%)

24Apr14

N/A

N/A

20.1

32.7

22.8

24May14

N/A

N/A

19.0

30.0

22.8

Technicals

(click to enlarge)

Looking first at the relative strength index chart [RSI] at the top, I see the stock in middle ground territory with upward trajectory and a value of 55.63. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is above the red line with the divergence bars increasing in height, indicating some bullish momentum. As for the stock price itself ($1197.12), I'm looking at $1253.90 to act as resistance and $1180.59 to act as support for a risk/reward ratio which plays out to be -1.38% to 4.74%.

Recent News

  1. On 08May14 the company reported first-quarter earnings which beat estimates on both the top and bottom lines. Earnings were $7.81 per share on revenue of $1.64 billion versus expectations of $6.93 per share on revenue of $1.63 billion.
  2. This earnings report was pretty good as the Kayak.com acquisition contributed pretty well. Gross bookings were up 34% from the prior year, international bookings were up 37% from last quarter, and domestic bookings were up 19% from last quarter.

Conclusion

The travel business seems to be booming of late with bookings companies, rental car companies, and hotel companies all doing well. Fundamentally, the company is fairly priced based on next year's earnings and on future growth potential while having great near- and long-term earnings growth potential. Financially, there is no dividend to speak of and the financial efficiency ratios have deteriorated a bit. On a technical basis, I believe there is some bullish momentum right now but I believe it'll get tired soon. Due to the bullish technicals, great near-term earnings growth potential, and great long-term earnings growth potential, I'm going to be pulling the trigger on a small batch right now.

Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Source: Priceline Has Some Upside Left To It