We've been asking ourselves recently if the market has placed a fair valuation on Expedia. Let's dive into some of the fundamental values of this large-cap Consumer Discretionary company to determine if there might be an opportunity here for value-minded investors.
Expedia's Valuation Is in Line With Its Sector Averages:
Expedia Group, Inc. operates as an online travel company in the United States and internationally. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.33 and an average price to book (P/B) ratio of 3.12. In contrast, Expedia has a trailing 12 month P/E ratio of 24.0 and a P/B ratio of 10.96.
When we divideExpedia's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.56, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.
The Business Has Negative Margins on Average:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $11,223 | $12,067 | $5,199 | $8,598 | $11,667 | $12,260 |
| Operating Margins | 6.0% | 7.0% | -52.0% | 2.0% | 9.0% | 10.0% |
| Net Margins | 4.0% | 5.0% | -2.0% | 0.0% | 3.0% | 7.0% |
| Net Income (MM) | $406 | $572 | -$116 | $15 | $352 | $899 |
| Net Interest Expense (MM) | $190 | $173 | $360 | $351 | $277 | $245 |
| Depreciation & Amort. (MM) | $676 | $712 | $893 | $814 | $792 | $789 |
| Earnings Per Share | $2.65 | $3.77 | -$19.0 | -$1.8 | $2.17 | $5.71 |
| Diluted Shares (MM) | 153 | 150 | 141 | 150 | 162 | 152 |
| Free Cash Flow (MM) | $1,097 | $1,607 | -$4,631 | $3,075 | $2,778 | $2,321 |
| Capital Expenditures (MM) | $878 | $1,160 | $797 | $673 | $662 | $803 |
| Net Current Assets (MM) | -$3,369 | -$4,012 | -$834 | -$1,697 | -$2,460 | -$3,085 |
| Long Term Debt (MM) | $3,717 | $4,189 | $8,216 | $7,715 | $6,240 | $0 |
| Net Debt / EBITDA | 5.2 | 5.36 | -4.45 | 11.03 | 5.69 | 3.23 |
