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TripAdviser Inc Valuation – March 2018 $TRIP

Company Profile (obtained from Marketwatch): TripAdvisor, Inc. owns and operates a portfolio of online travel brands. It operates its business through the Hotel and Non-Hotel segments. The Hotel segment includes revenue generated from services related to hotels, including click-based and display-based advertising revenue from making hotel room nights, airline reservations, and cruise reservations available for price comparison and booking, as well as subscription-based products such as Business Listings, transaction-based products such as Jetsetter and Tingo, and other revenue related to hotels. The Non-Hotel segment consists of the aggregation of three operating segments, which include its attractions, restaurants and vacation Rentals businesses. The company was founded by Nicholas Shanny and Stephen Kaufer in July 2011 and is headquartered in Needham, MA.

TRIP Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of TRIP – March 2018

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 $6,122,242,451 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.67 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
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 -27.97% Fail
6. Moderate PEmg Ratio PEmg < 20 58.63 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.43 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 2.67 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.37 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.75
MG Growth Estimate -4.25%
MG Value $0.61
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $10.89
MG Value based on 0% Growth $6.39
Market Implied Growth Rate 25.06%
Current Price $44.05
% of Intrinsic Value 7184.35%

Tripadvisor Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years, 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 Overvalued after seeing its EPSmg (normalized earnings) decline from $1.41 in 2014 to an estimated $0.75 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 25.06% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Tripadvisor Inc revealed the company was trading above its Graham Number of $15. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 58.63, which was above the industry average of 33.52. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.61.

Tripadvisor Inc scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $0.61
Graham Number $15.00
PEmg 58.63
Current Ratio 2.67
PB Ratio 4.43
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $993,000,000
Total Current Liabilities $372,000,000
Long-Term Debt $230,000,000
Total Assets $2,272,000,000
Intangible Assets $900,000,000
Total Liabilities $909,000,000
Shares Outstanding (Diluted Average) 137,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.02
Dec2017 -$0.14
Dec2016 $0.82
Dec2015 $1.36
Dec2014 $1.55
Dec2013 $1.41
Dec2012 $1.37
Dec2011 $1.32
Dec2010 $1.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.75
Dec2017 $0.74
Dec2016 $1.23
Dec2015 $1.42
Dec2014 $1.41
Dec2013 $1.24
Dec2012 $1.02
Dec2011 $0.72
Dec2010 $0.35

Recommended Reading:

Other ModernGraham posts about the company

TripAdvisor Inc. Valuation – November 2015 Update $TRIP
Tripadvisor Stock Analysis – August 2015 Update $TRIP
30 Companies in the Spotlight This Week – 5/23/15
Tripadvisor Inc. Quarterly Valuation – May 2015 $TRIP
28 Companies in the Spotlight This Week – 2/28/15

Other ModernGraham posts about related companies

Expedia Inc Valuation – February 2017 $EXPE
Priceline Group Inc Valuation – July 2016 $PCLN
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

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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