This Growth Stock Offers Long Term Value – Travelzoo Inc. (TZOO): Expedia Inc (EXPE), Groupon Inc (GRPN)

But even with high growth prospects, Travelzoo is not a no-brainer. Aside from competition from Groupon for the daily deals segment, Travelzoo also faces competition from the likes of Expedia on the Travel side.

Although Travelzoo has a differentiated offering from most other travel sites, Expedia Inc (NASDAQ:EXPE)’s well-established brand and aggressive overseas expansion threatens to cut off Travelzoo Inc. (NASDAQ:TZOO)’s growth. In addition, Expedia is working with Groupon Inc (NASDAQ:GRPN) on its own daily deals startup. Other travel companies are following suit, which means Travelzoo will have to fend off stiffer competition in the coming years.

Final Thoughts

At 8x EV/EBITDA and the potential for solid growth in the years ahead, Travelzoo looks cheap. The company’s current subscriber base is undervalued by the market, and the valuation disconnect will only grow wider as the subscriber base grows.

My main concern is whether the company has durable pricing power. The company is facing “unsustainable” pricing by competitors in the daily deals segment, and while the industry cannot sustain this pricing forever, the problem is not going to sort itself out next quarter.

Overall, Travelzoo Inc. (NASDAQ:TZOO) is an interesting company with high growth prospects. There are short-term concerns over growth and profitability that have allowed long-term investors to get in at a bargain price.

The article This Growth Stock Offers Long Term Value originally appeared on Fool.com and is written by Ted Cooper.

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