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Shares of online travel company Expedia (NASDAQ:EXPE) closed 23% higher on Friday after publishing its first quarter results. Shares have seen an aggressive move towards the upside as the results blew analysts away.

First Quarter Results

Expedia reported a 61% growth in first quarter adjusted net income to $36.9 million. Diluted non-GAAP earnings per share came in at $0.15 vs. $0.04 last year. Earnings per share excluding certain items came in at $0.26 for the quarter, beating the analyst consensus of $0.14. The company reported a net loss of $3.3 million after taking a $23.9 million charge related to discontinued operations.

Revenues rose 12% to $816 million as the gross bookings increased 15% to $8.4 billion. Reported revenues came in ahead of analysts consensus around $790 million. The total number of room nights grew 24% driven by a strong growth of 37% at Hotels.com

Bookings

Gross bookings increased 15% driven by a 24% increase in hotel room nights. Revenues increased 12% which was driven by an increase in hotel rooms stayed which was partially offset by a decrease in revenue room per night. The revenue as percentage of gross bookings fell 28 basis points to 9.7%

Revenue mix

Hotels services account for 70% for worldwide revenue, air tickets 11% and the remainder for 19%. Hotel revenues increased 18% driven by a 24% increase in the number of room nights stayed, partially offset by a 6% decrease in revenues per night. Air revenues decreased 17% driven by a 20% decrease in revenues per ticket, while the number of tickets sold increased 5%. Other revenues increased 15% driven by strong growth in car rentals, advertising and corporate fees.

Valuation

Expedia ended the first quarter with $2.0 billion in cash, equivalents and short term investments. It has $1.2 billion in long term debt for a net cash position of roughly $800 million. After Friday's jump in the share price the company is valued at 1.5 times annual revenues and 11 times 2011's annual profit. The valuation multiple compares to a revenue multiple of 5.6 times for Ctrip (NASDAQ:CTRP), 8.4 times for Priceline.com (NASDAQ:PCLN) and 7.2 times for Tripadvisor (NASDAQ:TRIP). These competitors trade at 19, 37 and 27 times annual earnings, respectively.

The company has repurchased 8.8 million shares in the first quarter of 2012 for a total consideration of $291 million. It still has 11.2 million shares authorized for a buyback.

Investment Thesis

Shares of Expedia hit fresh highs after the strong first quarter earnings report. Shares have already returned 39% year to date. While the company did not specify financial targets for the entire year of 2012 it seems that this year is going to be another year of revenues and profit growth.

Shares have hit new highs as a result of the jump of Friday and still trade at a significant discount compared to its competitors on both a revenue and profit multiple. Shares have a lot of upside before trading anywhere close to the valuation multiples of its competitors, which on average have seen stronger growth.

The company trades at a reasonably fair valuation, especially in relationship to its competitors, shows healthy growth, room for margin improvement and has a strong financial position.

Source: Expedia: Blow Out Quarter Sends Shares Higher