It's been a great afternoon session for Trip.com investors, who saw their shares rise 2.1% to a price of $63.61 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
an Exceptionally Low P/B Ratio but Priced Beyond Its Margin of Safety:
Trip.com Group Limited, through its subsidiaries, operates as a travel service provider for accommodation reservation, transportation ticketing, packaged tours, 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 20.93 and an average price to book (P/B) ratio of 2.93. In contrast, Trip.com has a trailing 12 month P/E ratio of 18.7 and a P/B ratio of 0.29.
Trip.com has moved 34.5% over the last year compared to 13.2% for the S&P 500 — a difference of 21.3%. Trip.com has a 52 week high of $77.18 and a 52 week low of $38.23.
Exceptional Profitability Overshadowed by Excessive Leverage:
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $5,122 | $2,807 | $3,142 | $2,907 | $6,269 | $7,313 |
| Operating Margins | 14% | -8% | -7% | 1% | 25% | 27% |
| Net Margins | 20% | -18% | -3% | 7% | 22% | 32% |
| Net Income (M) | $1,006 | -$497 | -$86 | $206 | $1,397 | $2,360 |
| Net Interest Expense (M) | $241 | $263 | $246 | $219 | $291 | -$238 |
| Depreciation & Amort. (M) | $94 | $121 | $113 | $92 | $88 | $15 |
| Diluted Shares (M) | 642 | 601 | 634 | 657 | 671 | 689 |
| Earnings Per Share | $1.57 | -$0.83 | -$0.14 | $0.31 | $2.08 | $3.43 |
| EPS Growth | n/a | -152.87% | 83.13% | 321.43% | 570.97% | 64.9% |
| Free Cash Flow (M) | $937 | -$669 | $299 | $308 | $3,013 | n/a |
| CAPEX (M) | $118 | $81 | $89 | $72 | $85 | n/a |
| Total Debt (M) | $7,189 | $8,641 | $6,263 | $17,837 | $22,742 | $5,420 |
| Net Debt / EBITDA | 5.3 | -60.49 | -29.19 | 143.66 | 10.03 | -0.62 |
| Current Ratio | 0.98 | 0.99 | 1.0 | 1.0 | 1.23 | 5.77 |
Trip.com has strong operating margins with a positive growth rate, an excellent current ratio of 5.77, and a strong EPS growth trend. However, the firm has a highly leveraged balance sheet.
