What Do You Need to Know About Trip.com (TCOM) Before Investing?

Trip.com shares moved 54.46% over the last 52 weeks, with a high of $40.17 and a low of $18.46. During this time, the stock outperformed the S&P 500 index by 67.67%. As of January 2022, the company's 50-day average price is $37.0. Trip.com Group Limited is a travel service provider for accommodation booking, transportation ticketing, destination and package tours, corporate travel management and other travel-related services in China and internationally. The large-cap Consumer Discretionary company is based in Shanghai, China. Trip.com has not offered any dividends in the last year.

Exceptional EPS Growth with a Highly Leveraged Balance Sheet:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $35,666 $18,316 $20,023 $20,039
Revenue Growth n/a -48.65% 9.32% 0.08%
Gross Margins 79.33% 77.99% 77.04% 77.48%
Gross Margins Growth n/a -1.69% -1.22% 0.57%
Operating Margins 14.13% -7.77% -7.05% 0.44%
Operating Margins Growth n/a -154.99% 9.27% 106.24%
Net Margins 19.66% -17.73% -2.75% 7.0%
Net Margins Growth n/a -190.18% 84.49% 354.55%
Earnings Per Share $10.92 -$5.4 -$0.87 $2.21
EPS Growth n/a -149.45% 83.89% 354.02%
Diluted Shares (MM) 642 601 634 634
Capital Expenditures (MM) $834 $532 $571 $0
Net Debt / EBITDA 2.54 99.22 11.68 7.6

Trip.com Is Overvalued:

Compared to the Consumer Discretionary sector's average of 22.33, Trip.com has a trailing twelve month P/E ratio of 116.84 and, according to its EPS guidance of 1.83, an expected P/E ratio of 19.79. Trip.com's PEG ratio is 0.8 based on its 145.8% annual average growth rate of historical and projected earnings per share. However, we believe that it is more prudent to calculate the PEG ratio using the broader market's 5-year expected EPS growth rate of 13.05%, because the growth rate implied by Trip.com's past and expected EPS is probably not sustainable. This more prudent approach shows a PEG ratio of 8.95, which suggests that the company's shares are actually overvalued.

However, Trip.com is likely undervalued in terms of its equity because its P/B ratio is 1.407 compared to its sector average of 3.12. The company's shares are currently trading -56.21% below their Graham number, implying there is a margin of safety for the stock. The Graham number is calculated according to the formula:

√(22.5 * 5-year average EPS * book value per share) = √(22.5 * 1.76 * 172.77) = $82.71

Trip.com Is the Subject of Mixed Market Indicators:

27 analysts are following Trip.com and have set target prices ranging from $34.25 to $58.43 per share. On average, they have given the company a rating of buy. At the current price of $36.22, TCOM is trading -23.08% away from its average analyst target price of $47.09 per share, implying an analyst consensus of strong upside potential for the stock.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.