priceline.com: Tomorrow's Monster Stock

Stocks climbing to 10 times their original price are rare breeds -- but they're not impossible to find. Especially when you have Fools for friends.

The market's best stocks include companies that have risen dozens of times in value by taking advantage of the market's weaknesses. These aren't penny stocks; they're viable companies with sound business prospects that are achieving phenomenal returns. Finding just one or two of these monstrously successful comapnies can help you establish a winning portfolio.

Stalking the monster
To find tomorrow's winners, we've enlisted the help of more than 180,000 monster-trackers at Motley Fool CAPS who have successfully picked stocks that have doubled, tripled, or even quadrupled in price. This week, All-Star member ryanj1178 gives us online travel agent priceline.com (BKNG -0.43%) as his next monster pick. He made his mark with Ford (F 0.69%), which surged 550% after he picked it to outperform the S&P 500, which rose only 40% in the same time frame.

Of course, you shouldn't jump into the breach just because an All-Star stock picker did. Just consider this as a starting point for your own research of extreme buying opportunities.

Priceline snapshot

Source: FinViz.com. N/A = not applicable; Priceline doesn't pay a dividend.

Taking wing
Calling a stock a potential "monster" investment after it's appreciated at a 50% annual average total return for the past decade seems a bit ludicrous. Indeed, Priceline is one of those rare breeds we alluded to at the beginning, but that doesn't mean it won't have as rich a return in the future. With its stock trading around $600 a share, it's fairly valued, but if you are one of those investors who looks to hold stocks for years and years (and you should be), then Priceline at these levels represents opportunity.

Without question, Priceline is facing headwinds and its growth is slowing. Part of that is due to the huge gains it recorded last year, so it's coming up against tough comps, but there's also the financial turmoil in Europe that's spreading across the continent, making it difficult to book hotels and flights. When consumers are wondering if the eurozone will fall apart, they're not exactly willing to pack their bags for vacation.

Lemons into lemonade
There are also more options these days for travelers to book fares and rooms. Google (NASDAQ: GOOG) has yet to become a full-fledged online travel agency, but it's moving more in that direction, and HomeAway (AWAY.DL) has developed a niche it's servicing. Then there are the traditional rivals, too, in Expedia (EXPE 0.33%), Orbitz Worldwide (NYSE: OWW), and Travelocity.

Yet as the old saw goes, in challenge there is opportunity. Because Europeans aren't traveling, room rates are plunging. Hotwire says room rates in Berlin, Paris, Barcelona, and Rome are at five-year lows with some European airfares dropping as much as 13%. When hotels and airlines can't book rooms or seats, they turn to Priceline to unload them for them.

The Booking.com acquisition a few years ago has proven to be a smart investment, as it is the premier dumping ground for unsold rooms. With fewer hotel chains and Europeans taking more vacation time than their American counterparts, it's the reason 60% of Priceline's business is overseas (but, as a recent Forbes profile also noted, the reason behind their earnings miss, too). And now that it has teamed up with China's Ctrip.com (TCOM -0.36%), giving it a nose under the tent in a country it had hardly any presence in previously. I fully expect we'll see its contributions continue to grow. Priceline's more recent purchase of RentalCars.com (formerly TravelJigsaw) is likely to have an equally outsized impact on returns, too.

Price is what you pay
With its enterprise value trading at 20 times free cash flow, it's not a bargain, as I said. But it's not such a lofty valuation, either, particularly when you factor in earnings growth estimates. Europe is undergoing a second recession that's bound to get worse, and I suspect that Priceline will prosper just as dramatically as it did during the Great Recession a few years back.