It hasn't been a great morning session for Trip.com investors, who have watched their shares sink by -13.4% to a price of $55.98. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
an Exceptionally Low P/B Ratio but Trading Above Its Fair Price:
Trip.com Group Limited, through its subsidiaries, operates as a travel service provider for accommodation reservation, transportation ticketing, packaged tours and in-destination, corporate travel management, and other travel-related services in China and internationally. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.6 and an average price to book (P/B) ratio of 3.19. In contrast, Trip.com has a trailing 12 month P/E ratio of 19.6 and a P/B ratio of 0.26.
Trip.com has moved 45.9% over the last year compared to 17.8% for the S&P 500 — a difference of 28.1%. Trip.com has a 52 week high of $77.18 and a 52 week low of $38.23.
Wider Gross Margins Than the Industry Average of 45.16%:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $4,524 | $5,122 | $2,807 | $3,142 | $2,907 | $6,269 |
| Gross Margins | 79% | 79% | 78% | 77% | 78% | 82% |
| Net Margins | 4% | 20% | -18% | -3% | 7% | 22% |
| Net Income (M) | $162 | $1,006 | -$497 | -$86 | $206 | $1,397 |
| Net Interest Expense (M) | $219 | $241 | $263 | $246 | $219 | $291 |
| Depreciation & Amort. (M) | $79 | $94 | $121 | $113 | $92 | $88 |
| Diluted Shares (M) | 567 | 642 | 601 | 634 | 657 | 671 |
| Earnings Per Share | $0.29 | $1.57 | -$0.83 | -$0.14 | $0.31 | $2.08 |
| EPS Growth | n/a | 441.38% | -152.87% | 83.13% | 321.43% | 570.97% |
| Free Cash Flow (M) | $938 | $937 | -$669 | $299 | $308 | $3,013 |
| CAPEX (M) | $98 | $118 | $81 | $89 | $72 | $85 |
| Total Debt (M) | $8,750 | $7,189 | $8,641 | $6,263 | $17,837 | $22,742 |
| Net Debt / EBITDA | 12.27 | 5.3 | -60.49 | -29.19 | 143.66 | 10.03 |
| Current Ratio | 1.15 | 0.98 | 0.99 | 1.0 | 1.0 | 1.23 |
Trip.com has exceptional EPS growth, generally positive cash flows, and wider gross margins than its peer group. However, the firm has a highly leveraged balance sheet. Finally, we note that Trip.com has growing revenues and decreasing reinvestment in the business and just enough current assets to cover current liabilities, as shown by its current ratio of 1.23.
