Sabre Corporation (SABR) in Southlake, Tex., is a leading software and technology company that serves the global travel and airline industry. It operates in two segments: Travel Solutions; and Hospitality Solutions. Operating in more than 160 countries, the company’s technology platform administers more than $260 billion worth of annual global travel spending. However, SABR has an ISS QualitySore of 5, indicating relatively high governance risk.

Shares of SABR have plummeted 26.2% over the past year, as the travel industry was hit by the COVID-19 pandemic and global travel restrictions. 

However, the stock has rebounded this year as the travel and tourism industry gained traction amid a solid vaccination drive and immense pent-up travel demand. SABR’s shares have gained 24.6% in price year-to-date to close yesterday’s trading session at $10.70.

Here is what could shape SABR’s performance in the near term:

Disinvestments

On March 1, SABR sold its AirCentre airline operations portfolio to leading digital flight and crew operations provider CAE for $392.50 million. The company also terminated its distribution agreement with the largest Russian government majority-owned carrier, Aeroflot, in the wake of Russia’s invasion of Ukraine. These developments are expected to adversely impact SABR’s revenues and profit margins in the short term.

Bleak Financials

SABR’s revenues increased 60% year-over-year to $500.64 million in its fiscal fourth quarter, ended Dec. 31, 2021. However, its operating loss amounted to $125.88 million, while net loss came in at $192.04 million. Its adjusted EBITDA loss stood at $26.39 million, while its loss per share came in at $0.60. Its cash outflow from operating activities came in at $6.50 million, while its cash outflow from investing activities worsened 147% from the same period last year to $23.89 million. Its cash and cash equivalents balance stood at $978.35 million as of Dec. 31, 2021, down 34.8% from the same period last year.

Impressive Growth Prospects

The $525.33 million consensus revenue estimate for its fiscal year 2022 first quarter (ending March) indicates a 60.4% improvement year-over-year. The company’s revenue is expected to increase 43.3% from the same period last year to $601.25 million in its fiscal second quarter (ending June 2022) and 45.1% year-over-year to $2.45 billion in its fiscal 2022.

The Street expects SABR’s EPS to rise 50% in the current quarter, 43.8% in the next quarter, and 59.8% in the current year. However, the company’s bottom line is expected to remain negative at least this year.

POWR Ratings Indicate Uncertainty

SABR has an overall C rating, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

SABR has a C grade for Value and Quality. The stock’s 1.41 forward Price/Sales multiple is 57.6% lower than the 3.33 industry average. However, its 73.40 forward EV/EBITDA ratio is 466.2% higher than the 12.96 industry average, justifying its Value grade. In addition, the company’s 59.06% trailing-12-month gross profit margin is 20.2% lower than the 49.14% industry average. Nonetheless, SABR’s negative trailing-12-month net income margin and ROA are in sync with its Quality grade.

Among the 72 stocks in the Internet industry, SABR is ranked #38.

Beyond what I have stated above, view SABR ratings for Growth, Momentum, Sentiment, and Stability here.

Bottom Line

SABR has been capitalizing on increased demand for travel since late last year, allowing it to book immense year-over-year revenue growth last quarter. However, with surging oil prices and international travel disruptions amid a resurgence of COVID-19 cases and the Russia-Ukraine war, SABR’s operating costs are expected to remain high in the near term, depressing its profit margins further. Thus, we think investors should wait until SABR’s profit margins and cash flows improve before investing in the stock.

How Does Sabre Corporation (SABR) Stack Up Against its Peers?

While SABR has a C rating in our proprietary rating system, one might want to consider looking at its industry peers, Yelp Inc. (YELP), Travelzoo (TZOO), and Opera Limited (OPRA), which have a B (Buy) rating.

SABR shares were trading at $10.57 per share on Friday morning, down $0.13 (-1.21%). Year-to-date, SABR has gained 23.05%, versus a -5.23% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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