Value-focused investors are constantly seeking stocks that are priced below their intrinsic value. One such stock that merits attention is Expedia Group Inc (EXPE, Financial). Currently priced at $109.8, the stock recorded a daily gain of 3.82% and a 3-month increase of 2.06%. The stock's fair valuation is $180.91, as indicated by its GF Value.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. The GF Value Line on our summary page provides an overview of the fair value that the stock should be traded at. It is calculated based on historical multiples, GuruFocus adjustment factor, and future estimates of business performance.
We believe the GF Value Line is the fair value that the stock should be traded at. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Deeper Analysis: Unveiling The Risks
Despite its seemingly attractive valuation, certain risk factors associated with Expedia Group Inc (EXPE, Financial) should not be ignored. These risks are primarily reflected through its low Altman Z-score of 0.89. This indicator suggests that Expedia Group, despite its apparent undervaluation, might be a potential value trap. This complexity underlines the importance of thorough due diligence in investment decision-making.
Decoding the Altman Z-Score
Before delving into the details, let's understand what the Altman Z-score entails. The Z-Score is a financial model that predicts the probability of a company entering bankruptcy within a two-year time frame. It combines five different financial ratios, each weighted to create a final score. A score below 1.8 suggests a high likelihood of financial distress, while a score above 3 indicates a low risk.
Company Snapshot: Expedia Group Inc (EXPE, Financial)
Expedia is the world's second-largest online travel agency by bookings, offering services for lodging, air tickets, rental cars, cruises, and more. It has also expanded into travel media with the acquisition of Trivago. Transaction fees for online bookings account for the bulk of sales and profits. The stock price currently fluctuates around the GF Value Line, indicating its potential fair value.
Breaking Down Expedia Group's Low Altman Z-Score
A dissection of Expedia Group's Altman Z-score reveals that the company's financial health may be weak, suggesting possible financial distress:
Conclusion: Navigating the Value Trap
Despite its attractive valuation, the low Altman Z-Score and potential financial distress suggest that Expedia Group might be a value trap. This underlines the importance of comprehensive analysis and due diligence before making investment decisions.
GuruFocus Premium members can find stocks with high Altman Z-Score using the following Screener: Walter Schloss Screen .
