Does Travelzoo (NASDAQ:TZOO) Deserve A Spot On Your Watchlist?
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like Travelzoo (NASDAQ:TZOO), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for Travelzoo
How Quickly Is Travelzoo Increasing Earnings Per Share?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Travelzoo's EPS has grown 18% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The music to the ears of Travelzoo shareholders is that EBIT margins have grown from 2.1% to 14% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Travelzoo.
Are Travelzoo Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Although we did see some insider selling (worth US$2.7m) this was overshadowed by a mountain of buying, totalling US$15m in just one year. We find this encouraging because it suggests they are optimistic about Travelzoo'sfuture. We also note that it was the Founder & Chief Talent Officer, Ralph Bartel, who made the biggest single acquisition, paying US$15m for shares at about US$4.40 each.
On top of the insider buying, we can also see that Travelzoo insiders own a large chunk of the company. In fact, they own 52% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. In terms of absolute value, insiders have US$73m invested in the business, at the current share price. That should be more than enough to keep them focussed on creating shareholder value!
Is Travelzoo Worth Keeping An Eye On?
If you believe that share price follows earnings per share you should definitely be delving further into Travelzoo's strong EPS growth. On top of that, insiders own a significant stake in the company and have been buying more shares. Astute investors will want to keep this stock on watch. Even so, be aware that Travelzoo is showing 2 warning signs in our investment analysis , you should know about...
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Travelzoo, you'll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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