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Priceline Group Inc Valuation – July 2016 $PCLN

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Priceline Group Inc (PCLN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Priceline Group Inc. is a provider of travel and restaurant reservation and related services. The Company, through its online travel companies (OTCs), connects consumers wishing to make travel reservations with providers of travel services across the world. It offers consumers an array of accommodation reservations (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties) through its Booking.com, priceline.com and agoda.com brands. Its priceline.com brand also offers consumers reservations for rental cars, airline tickets, vacation packages and cruises. The Company offers rental car reservations across the world through rentalcars.com. The Company provides restaurants with reservation management services and consumers with the ability to make restaurant reservations at participating restaurants through OpenTable, Inc. (OpenTable), a provider of online restaurant reservations.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of PCLN – July 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $66,434,726,133 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.45 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 809.26% Pass
6. Moderate PEmg Ratio PEmg < 20 27.25 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.49 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.45 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.20 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

PCLN value chart July 2016

EPSmg $49.65
MG Growth Estimate 15.00%
MG Value $1,911.37
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $719.87
MG Value based on 0% Growth $421.99
Market Implied Growth Rate 9.37%
Current Price $1,352.83
% of Intrinsic Value 70.78%

Priceline Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $18.37 in 2012 to an estimated $49.65 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.37% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Priceline Group Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

PCLN charts July 2016

Net Current Asset Value (NCAV) -$88.12
Graham Number $504.37
PEmg 27.25
Current Ratio 2.45
PB Ratio 7.49
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $4,864,763,000
Total Current Liabilities $1,987,574,000
Long-Term Debt $6,321,202,000
Total Assets $18,334,546,000
Intangible Assets $5,506,866,000
Total Liabilities $9,282,179,000
Shares Outstanding (Diluted Average) 50,129,000

Earnings Per Share History

Next Fiscal Year Estimate $62.00
Dec2015 $49.45
Dec2014 $45.67
Dec2013 $36.11
Dec2012 $27.66
Dec2011 $20.63
Dec2010 $10.35
Dec2009 $9.88
Dec2008 $3.98
Dec2007 $3.42
Dec2006 $1.68
Dec2005 $4.21
Dec2004 $0.76
Dec2003 $0.27
Dec2002 -$0.54
Dec2001 -$0.48
Dec2000 -$11.82
Dec1999 -$47.39
Dec1998 -$8.46

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $49.65
Dec2015 $40.95
Dec2014 $33.83
Dec2013 $25.58
Dec2012 $18.37
Dec2011 $12.37
Dec2010 $7.45
Dec2009 $5.54
Dec2008 $3.19
Dec2007 $2.55
Dec2006 $1.83
Dec2005 $1.56
Dec2004 -$0.63
Dec2003 -$4.89
Dec2002 -$9.55
Dec2001 -$13.92
Dec2000 -$18.27

Recommended Reading:

Other ModernGraham posts about the company

30 Companies in the Spotlight This Week – 5/23/15
Priceline Group Annual Valuation – 2015 $PCLN
27 Companies in the Spotlight This Week – 2/14/15
Priceline Group Inc. Quarterly Valuation – February 2015 $PCLN
27 Companies in the Spotlight This Week – 11/8/14

Other ModernGraham posts about related companies

TripAdvisor Inc Valuation – June 2016 $TRIP
TripAdvisor Inc. Valuation – November 2015 Update $TRIP
Expedia Inc. Analysis – October 2015 Update $EXPE
Tripadvisor Stock Analysis – August 2015 Update $TRIP
Priceline Group Annual Valuation – 2015 $PCLN
Tripadvisor Inc. Quarterly Valuation – May 2015 $TRIP
Tripadvisor Inc. Quarterly Valuation – February 2015 $TRIP
Priceline Group Inc. Quarterly Valuation – February 2015 $PCLN
Tripadvisor Inc. Quarterly Valuation – November 2014 $TRIP
Priceline.com Inc. Quarterly Valuation – November 2014 $PCLN

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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