Johnson & Johnson (JNJ), Tripadvisor Inc (TRIP): Tuesday’s Top Upgrades (and Downgrades)

Time to hit the road with TripAdvisor?
Finally: Tripadvisor Inc (NASDAQ:TRIP). This company’s a bit like Johnson & Johnson (NYSE:JNJ), inasmuch as TripAdvisor, too, generates superior cash profits. The $210 million in free cash flow it churned out last year was about 8% above reported GAAP income. Unfortunately, and also like J&J, TripAdvisor shares still cost too much despite the superior free cash flow, and also despite the fact that this company is growing much, much faster than J&J.

I calculate a price-to-free cash flow ratio of 35.5 on Tripadvisor Inc (NASDAQ:TRIP) shares today. Even with the company’s projected 16% annual growth rate, that’s a high price to pay. It’s also, incidentally, probably the reason investors are shrugging off Stifel Nicolaus’ endorsement of the stock today, and ignoring its suggestion that the shares could reach $58 a year from now.

$58 a share could happen, sure… but that would just make TripAdvisor’s overpriced shares even more overpriced than they already are — and more likely to fall right back down again.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson and TripAdvisor. The Motley Fool owns shares of Johnson & Johnson and TripAdvisor.

The article Tuesday’s Top Upgrades (and Downgrades) originally appeared on Fool.com and is written by Rich Smith.

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