Is TripAdvisor a Bargain Here?

With shares of TripAdvisor Inc. (NASDAQ:TRIP) trading at around $43.55, is TRIP an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

The bad news is that marketing costs will rise quicker than revenue in 2013. While this may pressure sales in the first half of 2013, the good news is that it’s not expected to have a long-term impact. TripAdivisor is choosing to add costs, which include a makeover of its display and investments in social media.

Q4 EPS came in at $0.23. The average expectation was $0.21. Q4 revenue increased 23 percent to $169.4 million. The average expectation was $167.1 million. However, there was no formal guidance, and the announcement that marketing costs would rise quicker than revenue severely impacted the stock price.

TripAdvisor now averages 60 million unique visitors per month. In Q4, unique visitors increased by approximately 45 percent. TripAdvisor is also now used in 30 countries. Another positive is that the company announced a $250 million stock buyback plan. Furthermore, according to Glassdoor.com, 83 percent of employees approve of CEO Stephen Kaufer.

Now let’s take a look at some important numbers prior to forming an opinion on the stock…

E = Equity to Debt Ratio Is Normal       

The debt-to-equity ratio for TripAdvisor is normal. The balance sheet is in positive territory.

Debt-To-Equity

Cash

Long-Term Debt

TRIP

0.59

$548.37 Million

$414.48 Million

OWW

2.58

$152.29 Million

$440.42 Million

TZOO

0.00

$61.56 Million

$0

 

T = Technicals on the Stock Chart Are Mixed  

TripAdvisor has outperformed Orbitz Worldwide (NYSE:OWW) and Travelzoo Inc. (NASDAQ:TZOO) over the past year. However, TripAdvisor has been the weakest performer of the three this year to date.

1 Month

Year-To-Date

1 Year

3 Year

TRIP

-1.37%

3.88%

57.60%

-7.15%

OWW

10.35%

15.62%

-1.72%

-53.13%

TZOO

9.88%

11.85%

-15.61%

89.98%

 

At $43.55, TripAdvisor is trading slightly below its 50-day SMA, and higher than its 100-day and 200-day SMA.  

50-Day SMA

43.59

100-Day SMA

38.70

200-Day SMA

39.40

 

E = Earnings Have Been Steady              

Earnings and revenue have both improved on an annual basis since TripAdvisor’s IPO.

N/A

N/A

2009

2010

2011

Revenue ($)in millions

N/A

N/A

352.09

484.64

637.06

Diluted EPS ($)

N/A

N/A

0.77

1.04

1.32

 

We already know what happened this quarter. Now let’s take a look at previous quarters as well.  

12/2011

3/2012

6/2012

9/2012

12/2012

Revenue ($)in millions

137.80

183.72

197.15

212.71

169.4

Diluted EPS ($)

0.16

0.35

0.37

0.41

0.23

 

Let’s take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

T = Trends Support the Industry

TripAdvisor has its own unique niche. Since the site is based on reviews, it will be more recession-resistant than online booking travel sites.

Conclusion

TripAdvisor has a lot going for it, but there are a few negatives as well. One, the short position is 12 percent. Some people won’t see this as a negative, but any time a short position is over 10 percent, you have to realize that there is a lot of conviction that the company will stumble. TripAdvisor also has a trailing P/E of 33.53. That said, the forward P/E is 23.80, margins are strong, the balance sheet is healthy, growth is consistent, and the company seems to be making all the right moves for the long haul. Without a formal outlook in regards to guidance for 2013, an OUTPERFORM rating isn’t a possibility. For now, TripAdvisor is a WAIT AND SEE.

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