Expedia Group Inc (EXPE, Financial) has recently drawn attention with a daily gain of 6.28% and a notable three-month gain of 21.32%. With an Earnings Per Share (EPS) of $5.57, investors are keen to determine if the current stock price reflects the company's intrinsic value. Is Expedia Group modestly undervalued? This valuation analysis aims to shed light on this question and provide a comprehensive assessment of the company's true market worth.
Company Introduction
Expedia Group Inc (EXPE, Financial), the world's second-largest online travel agency by bookings, is a powerhouse in the travel industry. With a diverse portfolio of services, including lodging, air tickets, rental cars, cruises, and more, Expedia Group (EXPE) has solidified its position in the market. The company's financials are equally impressive, boasting a market cap of $18.10 billion and sales of $12.60 billion. A key aspect to consider is the comparison between Expedia Group's stock price of $130.33 and its Fair Value (GF Value) of $180.39, suggesting that the stock might be trading below its estimated intrinsic value.
Summarize GF Value
The GF Value is a proprietary metric that estimates a stock's intrinsic value, factoring in historical trading multiples, a GuruFocus adjustment based on past performance and growth, and future business performance projections. When the stock price of Expedia Group (EXPE, Financial) hovers around the GF Value Line, it indicates the stock may be fairly valued. Currently, at $130.33 per share with a market cap of $18.10 billion, Expedia Group appears to be modestly undervalued, suggesting a potential for higher future returns relative to its business growth.
Financial Strength
Investors must scrutinize a company's financial strength to mitigate the risk of capital loss. Expedia Group's cash-to-debt ratio of 0.77 ranks favorably within the industry, suggesting a reasonable level of financial robustness. With an overall financial strength rating of 5 out of 10, Expedia Group's financial health is deemed fair, which is an essential factor for investors to consider.
Profitability and Growth
Expedia Group's track record of profitability over the past decade underscores its potential for sustained performance. With a revenue of $12.60 billion and an Earnings Per Share (EPS) of $5.57, coupled with an operating margin surpassing 60% of its industry peers, the company's profitability is ranked as fair. However, growth is a critical aspect of valuation, and Expedia Group's average annual revenue growth rate of -3.6% positions it below many competitors within the Travel & Leisure industry. This aspect of growth is a vital consideration for the company's valuation.
ROIC vs. WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) provides insight into its efficiency in generating returns relative to its capital costs. Expedia Group's ROIC of 4.41 is below its WACC of 10.65, indicating challenges in creating value over its capital costs. This comparison is crucial for understanding the company's profitability and potential investment returns.
Conclusion
In summary, Expedia Group (EXPE, Financial) appears to be modestly undervalued, presenting an attractive opportunity for investors. While the company's financial condition and profitability are deemed fair, its growth prospects may lag behind some industry counterparts. Investors interested in a deeper dive into Expedia Group's financials can explore the company's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
