About Expedia
We’re not going to lie, this is sort of not the best time to be writing about the Expedia Group.
It has nothing to do with the company itself, but rather the fact that we realize that the summer travel season is pretty much a wrap and it would’ve seemingly been a far more opportune time to talk about a company that deals quite heavily in the travel sector and various categories thereof about three months ago.
Eh, you know what they say, there’s no time like the present.
With that, we present (funny, right?) you the Expedia Group.
Headquartered in Seattle, Washington, Expedia is probably one of the main reasons that physical, in-person travel agencies hardly exist anymore, as this company, through many of its platforms makes planning for any sort of trip much easier and more efficient and likely less expensive in some cases for those planning trips.
Whether it is a business trip, vacation with a friend or two or any other occasion, Expedia has more than likely got you covered.
Believe it or not, this article is not sponsored by Expedia.
Yet.
At any rate, one of the primary ways in which Expedia generates revenue is through the fees it charges travelers through their platforms as well as through commissions earned from the hotels and airlines they connect travelers with.
The most well recognized platforms under the Expedia brand are Expedia (of course), which allows one to essentially put in the “where” and “when” of a trip (along with many other specialized filters) and find nearby hotels as well as discovering other aspects of the trip such as connecting travelers with flights, rental cars and other modes of transportation and pressing matters that get someone from nowhere to what feels like anywhere in a matter of minutes.
In addition to Expedia itself, the Expedia Group also owns Hotels.com, Vrbo, which is very similar but not exactly the same as Airbnb, Travelocity, Hotwire.com, Orbitz, Trivago and a few other lesser known platforms that connect travelers to their destinations in more ways than one.
It’s obviously worth briefly pointing out that this conglomerate operates in a highly cyclical space, as travel certainly has its boom and bust periods and given what COVID-19 did to the travel industry, it is clear that a company such as Expedia is not immune to a sudden drop in demand.
At all.
This is a bit concerning to us but it is also the sheer nature of the business and category in which it operates so it was to be expected and it is something we think investors, both current and prospective, should keep in mind as we continue along in this stock analysis article.
All of this being said, the Expedia Group is home to some great travel brands and certainly can be deemed a leader in the travel planning and agency segments of the global economy, which is no small market.
Let’s get right into the company’s core financials and other pertinent ratios and metrics.
Expedia’s stock financials
The Expedia Group has a market capitalization of $15.33 billion with an associated share price of $106.91, a price-to-earnings (P/E) ratio of 18.85 along with no annually distributed dividend offered to its shareholder audience at the moment, which is certainly a sensible decision on part of the company’s management team given that there is a lot of technology required to keep all of this group’s platforms up and running practically 24/7/365.
It can also be seen that this company’s stock (NASDAQ: EXPE) is slightly undervalued relative to its actual, intrinsic worth with its price-to-earnings (P/E) ratio standing a little below the standard fair value benchmark of 20, which is definitely something we don’t mind seeing as prospective shareholders.
In gaining some more familiarity with Expedia’s core financials, the company’s executives are in charge of approximately $21.5 billion in terms of total assets as well as just about $19.3 billion in terms of total liabilities, which makes some sense given that much of this company’s growth is likely rooted in the debt it is strapping onto its business, as, again, every single one of these companies relies upon excellent technologies and with that, continuous investment in current and emerging technologies (AI, anyone?), which largely explains why this company is running a little hot on the total liabilities side of things.
So long as Expedia’s leadership maintains more total assets than total liabilities and shows through its actions that it is committed to growing but not to its own detriment and potential overleveraged downfall (which we highly doubt will end up being the case with Expedia), we think its team should continue investing and reinvesting for the sake of staying ahead of the opposition.
With respect to the company’s income statement, it is far from shocking that revenues in 2020 absolutely cratered, as we previously harped on the fact that this company is far from being immune from COVID-19 and related pressures; the numbers just happen to prove it.
For instance, in 2018 and 2019, Expedia’s total revenues floated at around $11 billion per annum, however, the company’s revenue was basically cut in half (as reported in 2020) to just south of $5.2 billion, which was both egregious but, again, what else did you think was going to happen when a company as dependent on travel as this one is operating in an environment in which travel as we know it was pretty much completely shut down?
Thankfully, in the years that followed 2020, the Expedia Group reported more normal, stabilized revenue figures, as the company’s total revenue in 2021 is listed as almost $8.6 billion, continuing its rise to its latest reported figure of $11.6 billion, as reported in 2022.
Everything appears to be back to normal for Expedia and its subsidiaries, however, one must clearly have the stomach to deal with any future COVID-19-related restrictions that may come the world’s way.
Onto the state of the company’s cash flow statement, Expedia’s net income and total cash from operations are consistent in that 2020 was a rough, rough year, as both its net income and total cash from operations were negative, however, in all other years between 2018 and 2022 the company reported positive and mostly consistent figures in these arenas.
When the world is traveling at a normal rate, all seems to be well with Expedia and its subsidiaries.
Go figure!
Expedia’s stock fundamentals
Believe it or not, travel broadly is a fairly competitive industry, as airlines, car rental companies, travel agencies and other entities that operate within the sector tend to have very similar margins due to the ultra-competitive nature of the space as a whole.
At least, this has certainly been proven by the numbers listed on TD Ameritrade’s platform, specifically with respect to the company’s listed trailing twelve month (TTM) net profit margin.
For example, the Expedia Group’s TTM net profit margin is listed as 7.32% to the industry’s respective average of 8.02%, which, while it is slightly greater than that of Expedia’s at the moment, we are still satisfied in knowing that the discrepancy between the two is rather slim and isn’t nearly wide enough to make us concerned with the overall form of Expedia and its TTM net profit margin.
Moving right along to the company’s TTM returns on assets and investment(s), also according to the figures displayed on TD Ameritrade’s platform, Expedia’s have yet again remained nearly in lockstep with the industry (on average), with, for example, the company’s TTM return on assets sitting at 3.56% in comparison to the industry’s respective average of 2.26%.
Expedia remaining competitive with the industry’s averages on these fronts is music to our ears, especially with all of the moving parts within this complicated, stress-heavy industry.
Should you buy Expedia stock?
Travel is cyclical and there is nothing we or basically anybody else can do about it.
It sort of stinks, but make no mistake about it, Expedia is still a name one can rely on as it relates to the travel agency space, as it processes countless bookings across the globe and with the continual phasing out of physical travel agencies and with the technological firepower and diversified yet focused subsidiaries under its corporate umbrella, we think, all things considered, the future isn’t all that bad for Expedia as it relates to what it can control, however, with cases of COVID-19 reportedly flaring back up again, we don’t think it would be the best idea to consider this company’s stock (NASDAQ: EXPE) as an investment at the moment, but rather to perform some due diligence and figure out whether or not this stock is right for you moving forward, perhaps following the tapering of COVID-19 cases across the world.
For those who are specifically intent on pondering an investment in this nook of the travel sector, Expedia doesn’t seem to be a terrible pick by any means given that its shares are apparently slightly undervalued given its present price-to-earnings ratio, its revenues have risen back to normal levels since the initial onset and impact of COVID-19, its cash flows are generally strong and its aforementioned TTM net profit margin and returns on assets and investments remain competitive as well.
Therefore, putting all of the facts together, we still think it is best to give this company’s stock a “hold” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.