Deeper Look Into Travelzoo

| About: Travelzoo Inc (TZOO)
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I've written a bit about the online travel industry in the past and have traded a few of those names with Priceline (PCLN) being a personal favorite. That being said, I've also disclosed how much I like Tripadvisor (NASDAQ:TRIP). Today, I wanted to take a deeper look at Travelzoo (NASDAQ:TZOO) which has a fairly unique business compared to other players.

The main difference is that I think Travelzoo's business is a nice mix between Priceline (PCLN) and Groupon (NASDAQ:GRPN). It is able to provide local deals to the million of mailing list members that it has accumulated over the years. I do think that it is much more focused than Groupon (resulting in lower costs) and there are fewer questions regarding its accounting practices, etc. That has helped TZOO generate strong growth for many years now. The other major point is that while Groupon and others spend millions to acquire clients, Travelzoo has been more of a word of mouth thing which certainly makes it much easier to become profitable.

In other ways though, Travelzoo is able to provide web properties such as its search engine that make it easier for users to search for a specific deal. It's not quite the "Name Your Price" brand, but it is still very strong and getting better. From everything that I can tell, Travelzoo is a very well run company in a sector where growth continues to be strong. It has strong relationships with many of the top travel brands in the world.

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Valuation Estimates

Depending on whose earnings per share estimates you use, the P/E estimates for 2012 and 2013 are close to 15 and 13. That is a fairly attractive valuation for a company that is expected to increase its revenues by double digits for the next few years at a minimum. The company has a very strong balance sheet with no debt and significant cash (close to $2.50 per share). I personally think it is a very attractive valuation!

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Economic Environment Challenges

No doubt, the fact that Travelzoo has a large portion of its business in the UK is a challenge as that economy continues to go through a weak recovery.

That being said, I think that what Travelzoo offers is fairly unique and difficult to replicate which will certainly continue to offer a lot of good opportunities for the company. So a buying opportunity? Without question.