TripAdvisor Inc. (NASDAQ:TRIP) experienced a daily gain of 3.58%, albeit a 3-month loss of -3.23%. With a reported Loss Per Share of $0.2, the question arises: is this stock significantly undervalued? This comprehensive analysis aims to answer this question by delving into the company's valuation. We invite you to read on for an enlightening exploration.
Introduction to TripAdvisor Inc.
TripAdvisor Inc. (NASDAQ:TRIP), the world's leading travel metasearch company, boasts a platform offering 1 billion reviews and information on about 8 million accommodations, restaurants, experiences, airlines, and cruises. As of 2022, 65% of the company's revenue came from its core segment, which includes hotel revenue generated through advertising on its metasearch platform. Viator, its experiences brand, was 33% of sales in 2022, while TheFork, its dining brand, represented 8% of revenue. The company's stock price currently stands at $16.34, contrasting with the GF Value, an estimate of its fair value, at $40.74.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor considering past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value that the stock should ideally trade at. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
TripAdvisor (NASDAQ:TRIP) stock appears to be significantly undervalued according to the GuruFocus Value calculation. With a market cap of $2.30 billion at its current price of $16.34 per share, TripAdvisor seems significantly undervalued. Consequently, the long-term return of its stock is likely to be much higher than its business growth.
Evaluating TripAdvisor's Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Therefore, it's essential to carefully review a company's financial strength before deciding to buy its stock. TripAdvisor's cash-to-debt ratio of 1.24 is better than 63.15% of 825 companies in the Travel & Leisure industry, indicating fair financial strength.
Profitability and Growth of TripAdvisor
Companies that have consistently been profitable over the long term offer less risk for investors. TripAdvisor has been profitable 7 over the past 10 years. However, its operating margin of 5.24% ranks worse than 54.02% of 820 companies in the Travel & Leisure industry, indicating fair profitability.
Growth is a crucial factor in a company's valuation. The 3-year average annual revenue growth rate of TripAdvisor is -2.6%, which ranks worse than 52.28% of 767 companies in the Travel & Leisure industry.
ROIC vs WACC
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). During the past 12 months, TripAdvisor's ROIC is -2.15 while its WACC came in at 9.58.
Overall, TripAdvisor (NASDAQ:TRIP) stock appears to be significantly undervalued. The company's financial condition is fair, and its profitability is fair. However, its growth ranks worse than 75.66% of 608 companies in the Travel & Leisure industry. To learn more about TripAdvisor stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.