More than anything else, managers determine returns. They set strategy, hire key team members, oversee operations, and cash paychecks. Every move they make either enhances or destroys shareholder capital.
It pays to know who these men and women are, how they're paid, whether they, too, are owners, and how they perform versus competitors in certain key metrics. In this regular column, I'll examine all that and more with the goal of enhancing our understanding of some of the top stocks in Fooldom.
Next up: priceline.com
Foolish facts
|
Metric |
priceline.com |
|---|---|
| CAPS stars (out of 5) | ** |
| Total ratings | 1,243 |
| Percent bulls | 73.7% |
| Percent bears | 26.3% |
| Bullish pitches | 80 out of 126 |
| Highest rated peers | drugstore.com, PetMed Express, Acorn International |
Data current as of Feb. 24.
Say what you will about priceline.com's kooky ads, its price-driven travel bookings engine is about to get a lot more important. Mideast turmoil has pushed oil to more than $100 a barrel and forced the major airlines to raise prices.
United Continental Holdings
Base ticket prices are also going higher. According to The New York Times, some carriers have increased summer fares by as much as $250. Others have introduced "peak travel" surcharges of between $20 and $60 per round trip. If this keeps up -- and there's no reason to believe it won't -- travelers are going to need priceline.com to help them find otherwise elusive bargains.
To its credit, management isn't waiting for a flood of bargain seekers to show up at its door. Instead, they've committed to expanding in Asia and South America via its Booking.com hotel room finder, which now represents 120,000 hotels in 99 countries. Worldwide hotel room reservations rose 51% to $22 million in the fourth quarter.
Overall, adjusted fourth-quarter profit surged 71% on rising margins. Revenue improved 35% to $731 million. Gross bookings -- which includes the total dollar value of consumer purchases made through priceline.com, including taxes and fees -- rose 44% to $3.26 billion. All signs point to priceline.com increasing its share of U.S. and international travel bookings.
Management overview
|
Executive |
Years |
Cash Compensation |
Shares Owned* |
|---|---|---|---|
| Jeffery Boyd, Chief Executive Officer | 10 | $2,850,000 | 27,828 |
| Robert Mylod, Jr., Vice Chairman and Head of Strategy | 11 | $1,920,000 | 93,469 |
| Daniel Finnegan, Chief Financial Officer | 7 | $890,000 | 9,525 |
| Christopher Soder, President, N. American Travel | 11 | $956,000 | 10,000 |
Source: Capital IQ, a division of Standard & Poor's. (Data current as of Feb. 24.)
* Direct holdings only.
The results have to be gratifying to priceline.com's employees and executive team. CEO Boyd has been on staff for 11 of the company's 14 years of existence. Mylod and Soder have been around slightly longer.
They've made a killing over the years. Shares of priceline.com are up 19-fold since May 2004, when Fool-co-founder David Gardner first recommended the company to Motley Fool Stock Advisor members. Latecomers have done well, too. The stock has doubled over the past year.
You'd think the run would make shares of priceline.com unreasonably expensive. I'm not so sure, even though on the surface it looks like it: Capital IQ shows the stock trading for about 51 times trailing normalized earnings. Trouble is, priceline.com was trading for 42 times normalized earnings at the end of 2009. Doubling the stock price hasn't doubled the earnings premium.
Management analysis versus competitors
|
Company |
Insider Ownership |
Gross Margin |
ROC* |
ROE** |
|---|---|---|---|---|
|
Expedia |
3.64% | 79.3% | 11.5% | 15.7% |
|
Orbitz Worldwide |
1.38% | 79.7% | 6.0% | (36.4%) |
| priceline.com | 1.23% | 61.9% | 25.5% | 33.7% |
|
Travelzoo |
66.59% | 93.6% | 38.3% | 34.3% |
Source: Capital IQ, a division of Standard & Poor's. (Data current as of Feb. 24.)
* Return on capital. ** Return on equity.
Clearly, Travelzoo and priceline.com are the class of this group when it comes to profitable growth. Heady returns on equity and capital suggest both companies will deliver strong long-term performance for shareholders.
Travelzoo has yet to make good, but I'm beginning to wonder if the bearish sentiments I expressed in November are shortsighted. Here's what I wrote back then:
For as much as I relish the buyout speculation and improving fundamentals, I've yet to identify a clear competitive advantage that makes the stock any more attractive than its similarly priced peers.
Maybe it's time to rethink that position. Travelzoo trades for a lower premium to normalized earnings, yet has better gross margins and is just as efficient at capital allocation as priceline.com. And best of all, the company stands to benefit just as much as priceline.com does from bargain shopping travelers. I like that combination. So, as of today, I'm ranking Travelzoo to outperform in my CAPS portfolio.
Do you agree? Disagree? Using the comments box below, let us know which stock you'd rather own: priceline.com or Travelzoo. You can also post a YouTube link to your favorite priceline.com ad (here's mine) or rate the stock in Motley Fool CAPS.
Interested in more info on the stocks mentioned in this story? Add Expedia, Orbitz Worldwide, priceline.com or Travelzoo to your watchlist.
