Living in Lahaina, Maui gives me an opportunity to judge the overall health of the economy, as Maui welcomes millions of visitors every year. This year it has been busier than I can remember in the last 10 years. Hotel occupancy is up around the island and Front Street in Lahaina (named one of the top 10 great streets of America for 2011) is packed wall to wall with visitors from day through till night.
Most of these visitors book their travel through various travel booking sites or agencies. Seeing that travel to the island of Maui is up, I was curious about the possible investing potential of these travel booking stocks.
Today, I want to review the key growth fundamentals of the top five travel booking sites, focusing on EPS and sales growth, to see if any warrant a future investment. Large gains in EPS (Earnings Per Share) and sales growth is what leads to huge price gains in individual stocks - 130 years of historical stock market data proves this to be the case.
Let's get it started across the pond in China and India and then make our way back to the United States of America. All of the data below is provided by my premium data provider MarketSmith.
First up, Ctrip.com (CTRP). Ctrip.com is a China-based consolidator of hotel accommodations and airline tickets targeting individual business and leisure travelers.
Ctrip.com EPS has grown 56%, 47%, 68%, 50%, 24%, 25%, 16%, and 3% the past eight quarters. Sales growth is right on par with EPS growth, growing 47%, 47%, 52%, 44%, 36%, 26%, 26%, and 23% the past eight quarters. This growth is expected to slow down this year, with 2012 annual EPS estimates for $0.96 a share. This is a 34% decline from the year before. However, growth is expected to pick back up in 2013 with annual EPS estimates coming in at $1.21 for a gain of 26% compared to 2012.
Ctrip.com carries 0% debt to shareholder equity, has a cash flow of $1.54 per share, an EPS growth rate of 40%, spends 17.5% of sales on R&D, and has a return on equity of 40%. The P/E ratio is currently around 15, which is in the lower end of its 5-year historical range of 13-66.
The biggest problem with Ctrip.com is the declining mutual fund ownership. Fund ownership is steadily declining each quarter for the past six quarters, falling from 669 to 484 funds. Management still owns 5% of the shares outstanding. This is healthy as it shows management is vested in making sure the company continues to grow profits.
Next, let's go to India with a recent new issue MakeMyTrip Limited (MMYT). MakeMyTrip Limited is an India-based provider of online travel services, primarily for individual travelers via makemytrip.com.
MakeMyTrip Limited has seen some dynamic growth the past seven quarters, growing 25%, 100%, 150%, 160%, -20%, 100%, and 60%. Spurring those gains has been sales growth. Sales have grown 45%, 49%, 41%, 57%, 49%, 54%, 84%, and 50% the past eight quarters. Annual EPS estimates for 2012 and 2013 are for gains of 47% and 105%, respectively.
MakeMyTrip Limited does not have any debt to shareholder equity, has a cash flow of $0.31 a share, and a return on equity of 20%. Currently, MakeMyTrip.com sports a 121 P/E ratio, which is in the lower end of its short historical range of 100-999.
MakeMyTrip Limited has the exact same problem that Ctrip.com has. Mutual fund ownership is declining. Mutual fund ownership growth is a sign that companies with big money have done their research and like what they find. Declining growth indicates there is something wrong with the business model that they do not like. Mutual fund ownership has declined from 73 to 58 funds during the past four quarters. The good news is that management still owns 12% of the shares outstanding.
Getting back to the United States of America, let's take a look at a favorite from 2004 - Travelzoo Inc. (TZOO). Travelzoo Inc. is a New York, NY provider of online travel offers from airlines, hotels, cruise lines, and vacation packagers via Travelzoo.com.
Travelzoo Inc. continues to produce steady profits with EPS gaining 15%, 100%, 163%, 156%, 147%, 50%, 71%, and 74% the past eight quarters. Sales, during the past eight quarters, has grown 24%, 19%, 17%, 20%, 30%, 34%, 40%, and 23%. This growth is expected to slow down with recently raised 2012 and 2013 annual EPS estimates for gains of 9% and 12% respectively.
Travelzoo Inc. carries 0% shareholder debt to equity, has a cash flow of $1.63 per share, an EPS growth rate of 8%, and has a solid return on equity of 58%. The P/E ratio of 16 is in the low end of its historical 10-94 range.
The bad news when it comes to mutual fund ownership in these Leisure-Travel Booking stocks continues with Travelzoo Inc. Travelzoo Inc.'s mutual fund ownership has fallen from 202 to 157 funds the past three quarters. The great news, on the other hand, is management ownership. Management owns an extremely high 66% of the shares outstanding. It is obvious that it is in managements best interest to continue growing profits.
Now it's time to take a look at the two leaders in this sector based on the RS (Relative Strength) of the stock price in relation to the SP-500.
The first leader we have is Expedia, Inc. (EXPE). Expedia, Inc. is a Bellevue, WA provider of online travel services for leisure and corporate travelers and retail travel agents via expedia.com.
Expedia, Inc.'s EPS growth is beginning to slow with gains of 210%, 67%, 35%, 100%, 11%, 11%, 11%, and 0% the past eight quarters. Sales growth is stalling out, along with earnings, with gains of 20%, -1%, -10%, 6%, 16%, 16%, 16%, and 7% the past eight quarters. Annual EPS estimates for 2012 and 2013 are for gains of 0% and 14% respectively.
Expedia, Inc., unlike the previous stocks, carries a high 57% debt to shareholder equity, has a cash flow of $4.52 a share, spends 11% of sales on R&D, has an EPS growth rate of 23%, and has a return on equity of 16%. The current P/E ratio of 12 is in the lower end of its 5-year range of 5-28.
The good news about Expedia, Inc. is that, unlike the stocks above, mutual fund ownership has grown from 924 to 989 funds. On top of the growing mutual fund ownership, management owns 28% of the shares outstanding. Despite the slower growth, there is definitely something about this company that the smart money like.
Last on the list is one of the leading monster stocks currently in the stock market. Priceline.com (PCLN) is a Norwalk, CT provider of airline ticket, hotel room, car rental, vacation package and cruise services through priceline.com.
Priceline.com continues to grow at an unbelievable rate with EPS gaining 56%, 53%, 54%, 71%, 56%, 78%, 87%, and 58% the past eight quarters. Fueling this rapid growth in earnings is sales. Sales have grown 26%, 27%, 37%, 35%, 38%, 44%, 45%, and 35% the past eight quarters. This explosive growth is expected to continue well into the future. 2012 and 2013 annual EPS estimates are for gains of 33% and 23% respectively.
Priceline.com has 0% debt to shareholder equity, an extremely huge cash flow of $24.75 a share, a giant EPS growth rate of 56%, and an extremely impressive return on equity of 55%. These numbers are quite stunning. What I find more stunning is that the P/E ratio is only 31. While that is an overall low number it is in the upper end of the 5-year range of 8-35. However, savvy investors realize that a "high" P/E ratio is useless when it comes to finding monster stocks like Priceline.com. How often from 2003 to today did Priceline.com have a high P/E ratio, yet still gain over 8,000%? The answer is almost the entire time.
Mutual fund ownership continues to rise almost every quarter for the past two years, growing from 1159 to 1554 funds. Management only owns 1% of the shares outstanding, but that is normal for a company that has existed for over 10 years.
Priceline.com announced on March 6 that it is repurchasing up to $200 million worth of its common stock outstanding. It appears mutual funds and ownership understand that the sky is the limit, even if many individuals investors believe that the stock is "too expensive."
While all of these stocks have stellar fundamentals with future growth expectations - that indicate a bright profitable future - investors would be wise to dig a little further into each company to see which stock is best for them. For me, the clear winner is Priceline.com. I focus on the best of the best and there is no doubt that when it comes to making money Priceline.com is king. As long as the growth continues, long-term investors would be wise to purchase this stock on pullbacks.
My personal trading methodology is a more intermediate-term, trend-following methodology. Therefore, currently, only two stocks have my interest. Expedia, Inc. and Priceline.com. Expedia, Inc. needs to breakout to a new 52-week price high before I would consider initiating a position, following that heavy volume sell-off the past week. Priceline.com is extended on the short term and would only be considered by me if it pulls back to the 50-day moving average and then bounces off this key support line on strong volume.
Ctrip.com, MakeMyTrip Limited, and Travelzoo Inc. are all trending below their 50- and 200-day moving averages. These averages act as support when prices are trending higher and resistance when prices are trending lower. I have no interest in any of these securities until they can establish themselves above the 50- and 200-day moving averages on strong volume.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.