Last night's stellar quarterly report out of China's leading travel website Ctrip (Nasdaq: CTRP) makes a few things abundantly clear:
- The world's largest country -- with a whopping 1.3 billion people -- is warming up to the merits of leisure and corporate travel.
- Ctrip is growing faster than its smaller rivals like eLong (Nasdaq: LONG).
- Ctrip is also growing faster than even stateside speedsters like Priceline.com (Nasdaq: PCLN) and Expedia (Nasdaq: EXPE).
This is truly a scalable model as margins widened, even though a significant chunk of the growth came from lower-margin airline ticketing.
Good luck finding a flaw in Ctrip's performance. Earnings more than doubled to $0.27 a share, or $0.31 a share before stock-based compensation, obliterating Wall Street's expectations of just $0.21 a share in net income. Revenue shot up 58% to $49 million, also well above analyst targets.
Perhaps even more important to trend watchers is that Ctrip's growth actually accelerated during the year's final quarter. Yes, Ctrip's guidance is calling for top-line growth of just 35% this year, but only suckers fall for that sandbag trap. Let me take you back three months to this little gem in the company's third-quarter report:
"For the fourth quarter of 2007, Ctrip expects to continue strong year-on- year net revenue growth of approximately 35%," read the company's business outlook. Gee, last night's report of a 58% boost is nothing like the 35% that was projected.
Let's take it back another three months.
"For the third quarter of 2007, Ctrip expects to continue strong year-on-year net revenue growth of approximately 35%." Revenue ultimately clocked in at 55%.
Go back yet another three months to see that the same 35% perceived guidance is magically transformed into a 52% revenue-trotting reality a quarterly report later.
See, official guidance is a bit of a Xeroxed inside joke at Ctrip. Only newbies fall for it. It may not seem like a very funny joke, but the punchline always kills a few weeks later.
If you really believe that a company with accelerating growth will somehow grow by just 35% during a year that will find the Olympic Games in Beijing sending travelers scurrying about the country, watch out for the paper cuts as you dig your way into the company's past as the ultimate sandbagger.
Keep a Band-Aid handy. And remember to laugh hysterically the next time you hear the 35% laugher.
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