Dueling Fools: Ctrip.com Bull Rebuttal

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Sure, expectations are high for Ctrip.com (Nasdaq: CTRP). At 43.2, its forward P/E is more modest than its trailing P/E of 72.6, but U.S. Internet travel agencies such as Expedia (Nasdaq: EXPE), Orbitz Worldwide (Nasdaq: OWW), and Priceline (Nasdaq: PCLN) trade at forward P/E ratios of 20.5, 19.1, and 17.4, respectively. Even Ctrip's fellow Chinese competitor eLong (Nasdaq: LONG) trades at a comparatively svelte forward P/E of 27.1.

I won't even try to call Ctrip a value play, but I don't believe that it's a growth trap, nor that it sports an oversized valuation. Compared with its U.S. counterparts, Ctrip has greater growth prospects, and it's demonstrated that promise each and every quarter. eLong, on the other hand, appears to have more pressing concerns than running down Ctrip.

And while Wall Street was getting worked up over Ctrip's projected top-line growth of "only" 35%, intelligent investors were lining up to purchase shares. How many analysts can honestly believe that this 35% growth rate is accurate? The company has consistently sandbagged its net-revenue forecasts for some time now. When we look at the company's forecasted versus actual results for each of its past four fiscal quarters, I have no reason to believe that this trend will not continue in its ensuing quarters.

Fiscal Quarter	Est. Net Revenue Growth	Actual Net Revenue Growth
2007 Q3	35%	?
2007 Q2	35%	52%
2007 Q1	30%*	49%
2006 Q4	40%	45%
2006 Q3	40%	47%

*Based upon Ctrip's projection for FY 2007 net revenue growth of 30%, issued in conjunction with its 2006 Q4 results.

The company's net revenue forecasts have been anything but accurate. On May 16, Ctrip reported 49% year-over-year net revenue growth for Q1 2007, but only offered a projection of 35% for its Q2. Did the roof collapse on this stock? Nope -- shares proceeded to climb 13% during the next three trading days. Potential investors awaiting a chance to get in on Ctrip should be thanking Wall Street analysts and critics for the golden buying opportunity the company's lowball revenue estimate has presented.

Valuation is important. But for a business that doubled Q2 EPS year over year (after backing out share-based compensation), and posted a 49% increase in income from operations, this Hidden Gems pick should have plenty more growth in store.

Think you're done with the Duel? Think again! Go back and read the other entries, sound off in CAPS, and vote for the winner.

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Fool contributor Billy Fisher does not own shares of any of the companies mentioned. Priceline is a Stock Advisor recommendation. The Fool's disclosure policy offers complementary beverage service.