TripAdvisor, Inc. (TRIP) and Travelzoo (TZOO) are two leading online travel companies that provide hotel, lodging and accommodation search and booking facilities. TRIP operates in the Hotels, Media & Platform, and Experiences & Dining segments, under TripAdvisor-branded websites. TZOO publishes insider deals from travel, entertainment and local businesses, such as restaurants and spas.
While the travel industry experienced one of the worst periods in its history in 2020, there’s now growing optimism about the industry’s recovery this year because COVID-19 vaccines are gradually containing the spread of the virus globally. In fact, as pent-up travel demand continues to surge, the travel industry is on track for a potential positive inflection in the coming months. Because domestic travel activities are resuming gradually with the easing of lockdown restrictions, we think TRIP and TZOO are poised to witness strong demand for their services.
While TRIP returned 209.3% over the past year, TZOO gained 326.5%. In terms of their past month’s performance, TZOO is the clear winner with 24% gains versus TRIP’s 8.4%. But which of these stocks is a better pick now? Let’s find out.
Last month, TRIP and Reckitt, the makers of Lysol, entered a partnership to provide aid to nearly eight million tourism and hospitality businesses listed on TRIP’s platform. The partnership is aimed at supporting the post-pandemic travel surge and travel businesses by rebuilding traveler confidence.
On March 23, TRIP priced $300 million of convertible notes. It plans to use the net offering’s proceeds for general corporate purposes and to fund investments.
Last month, TZOO appointed Michèle Huiban as Chief Financial Officer. Her financial leadership and expertise should accelerate the company’s growth and allow it to create significant shareholder value.
Recent Financial Results
In the fourth quarter ended December 31, TRIP’s total revenue declined 65% year-over-year to $335 million. It reported a non-GAAP net loss of $55 million and total adjusted ebitda loss of $33 million during this period. The company’s loss per share was $0.41. Also, its Tripadvisor-branded hotels revenue declined 63% year-over-year to $57 million.
TZOO’s total operating expenses declined 45.3% year-over-year to $10.59 million in the fourth quarter ended December 31. The company’s reported net income from continuing operations was $173 thousand, while its earnings per share was $0.01 over this period. TZOO’s net cash from investing activities was $2.61 million and its net cash from operating activities was $9.23 million.
Past and Expected Financial Performance
TZOO’s total assets grew at a CAGR of 30.9% over the past three years. However, its total assets have declined at a 4.7% annualized rate over this period.
The Street expects TRIP’s revenue to increase 43.8% in the current year and 48.1% next year. TRIP’s EPS is estimated to decline 542.9% in the current quarter, and at the rate of 14% over the next five years.
In comparison, TZOO’s revenue is expected to increase 25.9% in 2021 and 31.5% in 2022. A consensus EPS estimate of $0.22 for 2021 represents a 246.7% improvement from the same period last year. Also, over the next five years, TZOO’s EPS is expected to grow at the rate of 19.8%.
TRIP’s trailing-12-month revenue is more than 11 times TZOO’s. Also, TRIP is more profitable with a gross profit margin of 90.9% versus TZOO’s 80.3%.
However, TZOO’s levered free cash flow margin of 107.6% compares favorably with TRIP’s negative value.
In terms of trailing-12-month price/sales, TRIP is currently trading at 12.01x, 238.3% higher than TZOO, which is currently trading at 3.55x. Also, its trailing-12-month ev/sales of 12.44x is 393.7% higher than TZOO’s 2.52x. TRIP is also more expensive in terms of forward ev/ebitda (52.56x vs 19.20x).
TZOO has an A overall rating, which equates to a Strong Buy in our proprietary POWR Ratings system. However, TRIP has a D overall rating, which translates to Sell. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
In terms of Value Grade, TZOO has a B, consistent with its lower-than-industry ev/sales ratio. TRIP’s Value Grade of D is reflective of its higher-than-industry p/e ratio.
Also, in terms of Quality Grade, TZOO has an A, given its higher profitability. In comparison, TRIP has a Quality Grade of B.
TZOO has a Sentiment Grade of B, which is in sync with analysts’ expectations regarding its earnings and revenue growth. In comparison , TRIP has a Sentiment Grade of F.
Of the 70 stocks in the F-rated Internet industry, TZOO is ranked #2 while TRIP is ranked #50.
Beyond what we’ve stated above, our POWR Ratings system also rates both TZOO and TRIP for Growth, Stability, and Momentum. Get the ratings for TZOO here. Also, click here to see the additional POWR Ratings for TRIP.
The POWR Ratings assesses stocks by 118 different factors, each with its own weighting.
Both TZOO and TRIP are good long-term investments considering the travel industry’s anticipated revival and their strategic growth initiatives. However, TZOO appears to be a better buy based on the factors discussed here. Its superior financials and relative undervaluation make it a better investment option right now.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. If you’re looking for other top-rated stocks in the Internet industry, click here.
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TRIP shares were trading at $55.83 per share on Thursday morning, up $2.04 (+3.79%). Year-to-date, TRIP has gained 93.99%, versus a 7.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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