Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Is Travelzoo Better Than Groupon?

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Suggesting that Travelzoo (Nasdaq: TZOO  ) is undervalued may seem ludicrous. Shares of the travel-deals publisher have popped fivefold since bottoming out last summer.

Granted, the stock also isn't necessarily a screaming bargain on the bottom line. Travelzoo's trading for 38 times this year's projected profitability and 26 times next year's earnings target.

However, stack up Travelzoo and its $1 billion market cap next to a profitless Groupon's proposed $20 billion price tag, and you get a whole new perspective on relative cheapness.

It's not fair to compare daily-deals darling Groupon with a travel-bargain specialist, but niche watcher Yipit Data recently did anyway. As highlighted in this morning's Deal Journal column,  in The Wall Street Journal, Yipit found that the average Groupon deal in New York City snagged 500 buyers. Travelzoo and (Nasdaq: AMZN  ) -backed LivingSocial clocked in at 1,000 and 500 vouchers bought, respectively.

Groupon naturally makes up the difference in volume. The company that once had a waiting list as long as nine months for merchants has gone from offering a single daily deal in cities two years ago to posting several marked-down experiences in narrower metropolitan regions.

But even though Groupon is big, it's not as if its gargantuan mailing list is the marketing advantage that it would like area restaurants, spas, and origami boot camps to believe.

"Based on the Yipit Data Product, which features nearly 20,000 offers per month across major U.S. metros, both Travelzoo and LivingSocial now average more vouchers sold per deal than Groupon in most major North American cities," Yipit wrote in its blog on Friday.

Yipit also points out that OpenTable (Nasdaq: OPEN  ) , WagJag, DealFind, and other smaller bargain broadcasters are selling as many vouchers per deal as Groupon in major markets -- if not more.

The rub for Travelzoo is that it hasn't ramped up its abilities to offer daily deals. Yipit finds that the publisher behind the popular "Top 20" travel-deals report offers three to four prepaid vouchers a week in New York City. However, the volume per deal is certainly encouraging for investors in Amazon, Travelzoo, OpenTable, The Knot (Nasdaq: KNOT  ) , AOL (NYSE: AOL  ) , and any other website that has hopped on the Groupon bandwagon since last year.

It is possible to beat Groupon at its own game.

Most analysts think Groupon's IPO is overvalued. Agree? Disagree? Share your thoughts in the comments box below.

Motley Fool newsletter services have recommended buying shares of OpenTable and Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz is a fan of discount sites, and he's already tracking local deals through Groupon and LivingSocial -- as well as Travelzoo. He owns no shares in any of the companies mentioned in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 07, 2011, at 7:46 PM, johnvanjohn wrote:

    Tzoo is in a class by itself . No gimmics. Good luck getting one of their deals..usually sold out before I get to them. Do not know much on the p/e ratio etc but do know they are to be trusted.

  • Report this Comment On June 10, 2011, at 12:04 AM, tissuetot wrote:

    Travelzoo offers deals that I want to go to or do for a price I wouldn't be able to obtain myself. It's no wonder Travelzoo is able to compete and probably do better in the long run because they really do offer a special deal at a great price.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1504240, ~/Articles/ArticleHandler.aspx, 10/26/2016 2:28:36 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 5 hours ago Sponsored by:
DOW 18,169.27 -53.76 -0.30%
S&P 500 2,143.16 -8.17 -0.38%
NASD 5,283.40 -26.43 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 4:00 PM
AMZN $835.18 Down -2.91 -0.35% CAPS Rating: ****
AOL.DL $0.00 Down +0.00 +0.00%
AOL CAPS Rating: *
OPEN.DL $0.00 Down +0.00 +0.00%
OpenTable CAPS Rating: *
TZOO $12.10 Down +0.00 +0.00%
Travelzoo CAPS Rating: **
XOXO $18.60 Down -0.29 -1.54%
XO Group CAPS Rating: **