As a three-time Motley Fool Hidden Gems pick, Ctrip.com
For starters, the company is positioned in one of the world's largest and fastest-growing economies. China's GDP growth rate in 2006 was a staggering 10.7%, in an economy that already ranks among the world's top five. (Here in the U.S., 2006 GDP growth was a mere 3.3%.)
Ctrip primarily offers its Internet travel service bookings to middle-class travelers. That slice of China's economy is estimated at between 100 million and 250 million people. By 2015, it could rise to more than 600 million -- roughly four times the current size of the United States' middle class.
Another key to Ctrip shareholders' success is the company's positioning in a hot industry. Here in the U.S., Priceline
The recent pullback in Ctrip's stock price, seemingly the result of volatile overall market conditions and analysts' disappointment at the company's Q3 projection, has provided an ideal entry point for Fools contemplating a purchase here.
Based on its Q2 results, it's not difficult to see why Ctrip has enjoyed such success. Aside from its top line growth, its business model remains immensely profitable. Excluding share-based compensation charges, earnings doubled from the year-ago quarter. It also doesn't hurt that the company has been able to maintain a healthy balance sheet while keeping its gross margin close to 80%.
Looking at Ctrip's business-segment results, it's hard not to be impressed with the growth that all three of the company's major business lines have experienced. Using its Q2 numbers, and looking at the year-over-year results in terms of the local currency, its hotel reservation, airline-ticketing, and packaged-tour business segments grew by 45%, 67%, and 49%, respectively. The 2008 Olympics in Beijing, and the 2010 World Expo in Shanghai, should further fuel this company's explosive growth.
Meanwhile, Ctrip's chief rival in China, eLong
As the recent volatility in its stock price has demonstrated, Ctrip might not be an entirely smooth flight. But for the long haul, this flight is going nowhere but up.
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Fool contributor Billy Fisher does not own shares of any of the companies mentioned. Priceline is a Stock Advisor pick. The Fool's disclosure policy leaves all seatbacks and tray tables in the upright position.