Buy Into Expedia Inc (EXPE)?

Still, these companies look expensive

The recent collapse in Expedia’s stock price highlights what happens when stocks that are highly valued do not meet expectations. TripAdvisor is facing the same risk as Expedia, trading at a trailing-12 month P/E of 47.6, and if the company can’t meet its lofty growth targets then investors will get hurt.

Travelzoo Inc. (NASDAQ:TZOO) could be a slightly cheaper play on the sector, trading at a trailing 12-month P/E of 24. The company is investing heavily to try and bring its offering inline with peers. In particular, it has been trying to simplify its online hotel-booking platform.

Unfortunately, this investing is cutting into earnings; the company’s earnings fell 24% year-over-year in the second quarter due to higher costs. Revenue, on the other hand, a more telling indicator of sales growth, expanded 5% year-on-year.

Still, as the company is investing for the future and revenue is expanding, Travelzoo Inc. (NASDAQ:TZOO) looks well placed for future growth.

Foolish summary

All in all, even after recent declines, Expedia Inc (NASDAQ:EXPE) still looks expensive on a valuation basis and growth is starting to slow. Additionally, the company’s stock still has plenty of room to fall as the high valuation adds plenty of risk. On the other hand, TripAdvisor is still growing rapidly but the company’s valuation looks a bit rich.

So overall, Travelzoo Inc. (NASDAQ:TZOO) would appear to be investors’ best bet as the valuation is low and the company is investing heavily for future growth.

The article After Recent Declines, Should Investors Buy Into Expedia? originally appeared on Fool.com and is written by Rupert Hargreaves.

Fool contributor Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool recommends TripAdvisor. The Motley Fool owns shares of TripAdvisor. Rupert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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