Travelzoo vs. Trivago: Which Stock is a Better Buy?

NASDAQ: TRVG | trivago N.V. News, Ratings, and Charts

TRVG – As COVID-19-related restrictions are gradually easing, the travel and tourism industry should witness increasing demand in the upcoming months. Online travel platform operators trivago (TRVG) and Travelzoo (TZOO) are seeing advanced bookings, indicating their revenue growth in the near term. But which of these stocks is a better buy now? Let’s discuss.

Travelzoo (TZOO) and trivago N.V. (TRVG) are two prominent internet-based travel-and-tourism platform operators. Germany-based TRVG offers hotels and accommodation search platforms through online travel agencies, hotel chains, and independent hotels internationally. The company provides access to its platform through 54 localized websites and apps in 32 languages. TZOO is a media commerce company that provides travel, entertainment, and local deals from various companies and businesses worldwide. It serves airlines, hotels, cruise lines, tour operators, car rental companies, theater and performing arts groups, restaurants, and spas.

As vaccines and booster shots are helping reduce the spread of the Delta coronavirus variant, travel restrictions are being eased. So, the travel and tourism industry is expected to rebound in the upcoming months. The travel and tourism market is expected to grow at 24% CAGR to reach $913.28 billion by 2025. So, both TRVG and TZOO should benefit.

While TRVG gained 1.7% year-to-date, TZOO surged 23.9%. In terms of the past nine months’ performance, TZOO is a clear winner with 25.5% gains versus TRVG’s 13.4%. But which of these stocks is a better pick now? Let’s find out.

Recent Financial Results

TRVG’s total revenues for its fiscal second quarter ended June 30, 2021, increased 491.8% year-over-year to $95.47 million ($110.68 million). The company’s operating loss came in at $2.86 million ($3.32 million), down 89.3% from the prior-year period. While its net loss decreased 83.7% year-over-year to $3.29 million ($3.81 million), its loss per share decreased 83.3% to $0.06. As of June 30, 2021, the company had €193.66 million ($224.50 million) in cash and cash equivalents.

For its fiscal second quarter ended June 30, 2021, TZOO’s revenues increased 172.4% year-over-year to $19.08 million. The company’s gross profit came in at $16.56 million, indicating a 240.5% year-over-year improvement. Its non-GAAP operating income came in at $4.86 million for the quarter, compared to a loss of $2.14 million from the prior-year period. TZOO’s net income came in at $3.01 million, versus a $6.19 million net loss in the year-ago period. Its EPS came in at $0.22, compared to a loss of $0.55 in the year-ago period. The company had $80.96 million in cash and cash equivalents as of June 30, 2021.

Past and Expected Financial Performance

TRVG’s total assets have declined at a CAGR of 9% over the past three years. TRVG’s EPS is expected to remain negative in the current year but increase 200% next year. Its revenue is expected to grow 39.3% year-over-year in the current year and 72.7% next year. Analysts expect the stock’s EPS to grow at a 33.3% rate per annum over the next five years.

In comparison, TZOO’s total assets have grown at a CAGR of 40.6% over the past three years. Analysts expect TZOO’s EPS to increase 480% year-over-year in the current year and 71.9% next year. Its revenue is expected to improve 40.3% year-over-year in the current year and 22.3% next year. The stock’s EPS is expected to grow at a 19.8% rate per annum over the next five years.

Valuation

In terms of forward EV/EBITDA, TRVG is currently trading at 47.58x, 255.3% higher than TZOO’s 13.39x. In terms of non-GAAP forward P/E, TRVG’s 1570.49x compares with TZOO’s 23.17x.

Profitability

TRVG’s trailing-12-month revenue is 4.5 times higher than what TZOO generates. However, TZOO is more profitable, with a 4.3% EBITDA margin versus TRVG’s negative value.

Also, TZOO’s ROE, ROA and ROTC values of 10.2%, 0.4%, and 1.6% compare favorably with TRVG’s negative values.

POWR Ratings

While TRVG has an overall C grade, which translates to Neutral in our proprietary POWR Ratings system, TZOO has an overall A grade, equating to Strong Buy. The POWR Ratings are calculated considering 118 different factors, each weighted to an optimal degree.  

Both TZOO and TRVG have a B grade for Momentum, consistent with their impressive price gains. In terms of their past year’s performance, TZOO has surged 78.9%, and TRVG has gained 56.7%.

TZOO has an A grade for Sentiment, which is consistent with favorable analyst estimates. Analysts expect TZOO’s EPS to grow 480% year-over-year in the current quarter ending September 30, 2021, to $0.57. However, TRVG’s C grade for Sentiment is in sync with analysts’ expectation that its EPS will remain negative for the current quarter.

Of the 77 stocks in the Internet industry, TRVG is ranked #11, while TZOO is ranked #1.

Beyond what we’ve stated above, our POWR Ratings system has also rated TZOO and TRVG for Growth, Stability, Value, and Quality.  Get all TRVG ratings here. Also, click here to see the additional POWR Ratings for TZOO. 

The Winner

Since the travel and tourism industry’s demand is expected to rebound with the easing of restrictions, both TRVG and TZOO should see increasing revenues in the upcoming quarters. However, relatively lower valuation and higher profitability make TZOO a better buy here.

Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Internet industry.


TRVG shares were trading at $2.50 per share on Thursday afternoon, up $0.04 (+1.63%). Year-to-date, TRVG has gained 3.31%, versus a 16.72% rise in the benchmark S&P 500 index during the same period.


About the Author: Sweta Vijayan


Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...


More Resources for the Stocks in this Article

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