The stock of TZOO has experienced very wide swing within one year. Following the data of Google finance, at July 2010, the stock was around $12. Then only nine months later, in April 2011, it shot up to $94, and now it’s staying at $37. The company also announced a 500,000 shares buy back today.
CNBC's Jim Cramer did a quick interview with Christopher Loughlin, the CEO of TZOO on the fundamentals of the business.
The CEO thinks that TZOO's 34% growth rate is fantastic. The EPS for the first half was almost up 100%, and the PEG ratio was up 0.6. So he thinks it’s a great value for the investors of TZOO to buy it back. For the current ratio, the company has plenty of cash on hand, and the business is very profitable. “We’re not an internet company losing money," he said. "We’re making money.”
Cramer gave Loughlin a quote from the banker opinion on TZOO. It says Travel Zoo reported much worse than expected second-quarter revenue and earnings due to slower growth in its core business and significant investments in its local deals business. The compounding revenue shortfall on earnings was a significant increase in operating cost. For the operating cost, Loughlin said TZOO the company has run a TV ad, which costs around 7 cents in EPS. In addition, it hired more than 100 people, which is about a 35% increase in the business’ head count. Although it has slide shortfall in revenue compared to analysts’ expectation, but the business is up 34%, that’s a record revenue growth this business.
Travel Zoo is all bout deals. TZOO helps travel companies stimulate incremental demand in urgent times. Two disastrous events, September 11 and the July bombings in London, helped companies get people into their hotels again. It has put 10,000 people into the Atlantis resort in the Bahamas. When times get tough, it’s actually good for Travel Zoo. The fundamentals are consumers have plenty of money; they’re frugal and looking for a deal. TZOO offers the best deals and are doing a great job around that.
If you are looking at multiples on revenue, TZOO is around 3.6, and some of these companies have 16 times net revenue, so Loughlin thinks it’s a good value. The business strategy for TZOO is to be the quality leader in travel deals. That’s how the business got started. The CEO said the company’s become entertainment and local, and they’ll continue to stay focused on quality. It has dinner at the Four Seasons, lunch at the Ritz-Carlton, and he doesn’t see the same thing for the rest of the market.
The business is growing and the rest of the market is losing share. He’s happy with what he’s seeing. In the end, the outstanding deal will perform. “If you have a mediocre deal the people aren’t interested in, it won’t perform, as simple as that.” Travel Zoo was started in 98 and 99, and has been through a tough time twice. The company is a small cap, and the CEO does not care much about the valuations in the market place. He said the company is not managing the Street, it’s building the great business, and everybody in TZOO is happy with what they are doing.
The interview video can be viewed in the following link
CNBC: Cramer interviews CEO of Travel Zoo
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