Booking has been treading water for the past six months, recording a small return of 1.6% while holding steady at $4,447. However, the stock is beating the S&P 500’s 11% decline during that period.
Is there still a buying opportunity in BKNG, or does the price properly account for its business quality and fundamentals? Find out in our full research report, it’s free.
Formerly known as The Priceline Group, Booking Holdings (NASDAQ:BKNG) is the world’s largest online travel agency.
As an online travel company, Booking generates revenue growth by increasing both the number of stays (or experiences) booked and the commission charged on those bookings.
Over the last two years, Booking’s room nights booked, a key performance metric for the company, increased by 13.6% annually to 261 million in the latest quarter. This growth rate is among the fastest of any consumer internet business and indicates its offerings have significant traction.
Analyzing the change in earnings per share (EPS) shows whether a company’s incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Booking’s EPS grew at an astounding 60.1% compounded annual growth rate over the last three years, higher than its 29.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Booking has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the consumer internet sector, averaging an eye-popping 33% over the last two years.
These are just a few reasons why we think Booking is a high-quality business, and with its recent outperformance in a weaker market environment, the stock trades at 16.4× forward EV-to-EBITDA (or $4,447 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.
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