Relative valuation
Travelzoo currently trades at 22 times earnings, while sporting revenue and net income growth rates of 7% and 49%, respectively. I expect to see this growth rise as the company begins to capture revenue from its mobile users. The industry is currently trading at an earnings multiple of 26 times. The largest player in the space, Priceline.com Inc (NASDAQ:PCLN), currently trades at 25.3 times earnings with an estimated EPS growth rate of 20%.
Priceline.com Inc (NASDAQ:PCLN) dominates the online hotel booking space with 97% of its revenue coming from this business. Shares have performed very well over the last few years and are currently at 52-week highs. Priceline.com Inc (NASDAQ:PCLN) reported very strong growth of 43% internationally earlier this month as a result of its European and Asian markets. Going forward, this company is in a solid position to benefit from rising incomes and ages in China, which bodes well for sustained long-term growth.
Conclusion
Travelzoo Inc. (NASDAQ:TZOO) has emerged as a major player in the online travel space. The company should at least trade at the industry multiple which would place shares at $33. Going forward, the mobile platform release will allow the company to convert a higher percentage of its mobile users, which should result in much higher revenue growth.The focus on social media has proven very successful, and these campaigns should lead to a higher percentage of mobile users in the years ahead. Consider Travelzoo Inc. (NASDAQ:TZOO) as a high quality alternative for exposure to the online travel industry.
The article Buy This Stock on Management’s Strategic Focus originally appeared on Fool.com is written by Nathaniel Matherson.
Nathaniel Matherson has no position in any stocks mentioned. The Motley Fool recommends Priceline.com. The Motley Fool owns shares of Priceline.com. Nathaniel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
