Two-and-a-half years after the shock of Sept. 11, Americans are starting to travel again. According to a recent Wall Street Journal article, the State Department says that passport applications have increased 13% since last October, and are now on track to make 2004 a record year for issuance of the dark-blue passport so beloved by hotel operators and bric-a-brac sellers around the world.

So, perhaps it is worth taking a moment to consider how this trend, assuming it continues to develop, can be used as an investing play. Between the past year's general runup in stock prices and the dearth of customers contributing revenue to offset their often massive fixed costs, American travel-related companies are in a pretty sad state these days.

Nine times out of 10, they are free cash flow negative and have price-to-earnings-to-growth ratios (PEGs) well above the value investor's baseline of 1.0. But if tourism is a cyclical industry, then the time to buy may well be when P/E ratios are high. Counterintuitively, the P/Es of cyclicals tend to fall only when business picks up and the "E" swells, contracting the P/E ratio.

To wit, a few possibilities with currently ugly-looking P/Es (which look even worse when measured against their five-year projected earnings growth rates) that may have better days ahead of them:

  • Cruise line Carnival (NYSE:CCL): PEG 1.4.

  • Carnival archrival Royal Caribbean (NYSE:RCL): PEG 1.5.

  • American Airlines' holding company, AMR (NYSE:AMR): PEG 1.8.

  • Delta Air Lines (NYSE:DAL): Negative earnings, negative PEG.

  • Online travel company Orbitz (NASDAQ:ORBZ): PEG 1.1.

  • Plane ticket and hotel room auctioneer (NASDAQ:PCLN): PEG 2.7.

And finally, two safer bets:

  • owner InterActiveCorp (NASDAQ:IACI) has a PEG of 1.3, but a quite reasonable enterprise value-to-free cash flow ratio of 21.

  • owner Sabre Holdings (NYSE:TSG) has a PEG in line with the other travel companies: 2.0. But that number is belied by the company's discounted EV/FCF ratio of 12.5.

In short, there are still investment opportunities in the travel industry, both for the risk taker and for the value investor. Join us on the Fool's discussion boards for these companies, and let's talk over what their prospects might be if Americans begin traveling again.

Find out which companies Tom Gardner is highlighting as undervalued opportunities in Motley Fool Hidden Gems. You can try it, risk-free, for 30 days.

Motley Fool contributor Rich Smith owns no shares in any companies mentioned in this article.