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What happened
Shares of travel services company Ctrip.com International Ltd. (TCOM 2.30%) jumped as much as 12.9% in a short trading day Friday after the company reported third-quarter earnings. At 11:00 a.m. EST, the stock was still up 11.1% on the day.
So what
Quarterly revenue rose 75% to $836 million, driven by the acquisition of Qunar Cayman Islands Limited at the end of last year. Net income was $3.6 million, or $0.01 per ADS, but on an adjusted basis, earnings were $0.17 per ADS, topping expectations by $0.06.
Ctrip also announced it is acquiring U.K.-based Skyscanner Holdings, thereby expanding its geographic diversity. The price of the acquisition was about $1.74 billion.
Now what
Growth continues to be impressive and margin expansion will help the bottom line as operational leverage continues. The challenge is valuation at today's share price. Net income of just $3.6 million per quarter for a company with a $23 billion valuation is steep for investors in today's market. But while its valuation is steep, operations appear to be moving in the right direction, which is what investors are betting on today.
