Cendant: Compelling At Current Levels (CD)

Shares of real estate and travel company Cendant (CD) closed up 1.8% on Tuesday on company guidance and confirmation that the company’s split-up is proceeding on schedule. Cendant owns a slew of well known brands including Days Inn, Howard Johnson, Coldwell Banker, and Avis.

Sanjay Ayer of Morningstar likes the company and gives it 5 stars, Morningstar’s highest rating. Ayer calculates CD’s fair value at $23 and recommends investors consider buying at $17.70. Shares closed Tuesday at $17.50.

An excerpt from Ayer’s 2/14/06 Analyst Note:

We believe the shares, which have steadily declined in recent months, offer a highly attractive risk/reward trade-off now. Uncertainty is likely to remain high in the near term, owing to concerns surrounding the cooling real estate market, the woeful performance of the travel distribution business (notably online agent e-bookers), and the impending four-way split. Because we are convinced that the core elements of our Cendant thesis still hold -- its businesses generate lots of free cash flow and solid returns on capital -- we think this uncertainty has created a compelling opportunity for investors.

CD 1-yr chart:

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