Expedia Group Inc (EXPE, Financial) recently experienced a significant daily loss of 15.25%, contributing to a three-month decline of 23.65%. Despite these setbacks, the company maintains an Earnings Per Share (EPS) of 5.34. This analysis seeks to determine whether Expedia Group (EXPE) is currently undervalued, which could indicate a potential opportunity for investors.
Company Overview
Expedia Group, the world's second-largest online travel agency by bookings, offers services for lodging, air tickets, rental cars, cruises, and more. The company is well-known for its portfolio of brands including Expedia, Hotels.com, and Vrbo, alongside its metasearch brand Trivago. Primarily, transaction fees for online bookings generate the bulk of sales and profits. Currently, with a market capitalization of $15.30 billion and sales amounting to $13.10 billion, Expedia's financial footprint is substantial in the travel and leisure industry.
Understanding GF Value
The GF Value is a proprietary measure calculated to represent the intrinsic value of a stock. For Expedia Group, the GF Value is set at $158.7, suggesting that the stock is currently modestly undervalued at a price of $115.33 per share. This valuation is based on historical trading multiples, an adjustment factor from GuruFocus reflecting past business performance, and projected future business outcomes. If a stock trades below this line, as is the case with Expedia Group, it indicates potential for higher future returns.
Financial Strength and Stability
Expedia Group's financial strength is crucial for assessing risk and potential long-term gains. The company's cash-to-debt ratio stands at 0.65, ranking it better than 51.71% of its peers in the industry. This indicates a fair level of financial health, which is further supported by a financial strength rating of 5 out of 10 from GuruFocus.
Profitability and Growth Metrics
Expedia Group's profitability is robust, with an operating margin of 11.43%, ranking better than 60.68% of competitors. Despite a challenging environment, the company has maintained profitability over the past decade. However, growth remains a concern, with a 3-year average revenue growth rate better than 78.1% of industry peers but a stagnant EBITDA growth rate over the same period.
Return on Investment Capital Analysis
An essential measure of efficiency is the comparison between Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC). Currently, Expedia's ROIC is 4.51, which is below its WACC of 10.68, indicating that the company is not generating adequate returns relative to its capital costs.
Conclusion
While Expedia Group (EXPE, Financial) appears modestly undervalued according to the GF Value, potential investors should consider both the financial strength and the challenges in growth and return on capital. For those interested in further details about Expedia Group's financials, more information can be found in its 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.
