Motley Fool Inside Value recommendation Cendant (NYSE:CD) is in the midst of a radical transformation -- one that could turn this company from a value play to a growth story in two to three years, according to the newsletter.

Cendant's goal is to be a real estate and travel company. To get there, it's had to shed a number of great assets that just didn't fit future objectives.

Gone is No. 2 tax preparer Jackson Hewitt (NYSE:JTX). The combination of a $175 million special dividend to Cendant and the proceeds from an initial public offering (IPO) in June 2004 added $770 million to Cendant's coffers.

Gone is mortgage and fleet-management services company PHH (NYSE:PHH), which was spun off to Cendant shareholders at the end of January.

Gone is vehicle-fleet service provider Wright Express (NYSE:WXS). The March IPO netted Cendant $720 million.

The final asset for sale is Marketing Services, a value-added membership, insurance, and loyalty marketing company. Cendant announced this morning that it would sell Marketing Services to a private firm for $1.7 billion in cash, plus $125 million in newly issued preferred shares in the purchaser.

On the acquisitions side of the ledger, Cendant bought online travel company Orbitz last November for $1 billion (net of cash). The acquisition was immediately accretive to earnings, and the purchase and timing were considered opportune for Cendant, since major selling shareholders included Delta Air Lines (NYSE:DAL), which was eager to put some cash on the books.

Also joining Cendant in 2004 were hotel brands Ramada and Days Inn, both acquired from Marriott International (NYSE:MAR). The U.S. rights to both cost $200 million. In a separate deal, Cendant also bought Ramada International's trademark rights. With these acquisitions, Cendant is the world's largest lodging franchisor.

Cendant reported second-quarter results last night. Compared with the year-ago quarter, revenue rose a healthy 8%. Net income fell 44% -- but that beat analyst estimates by $0.02 a share. Best of all, free cash flow, the better measure for determining a business's strength, came in at a robust $702 million -- a 27% increase over the year-ago period, despite the aforementioned decline in net income.

The company also announced that it would double its 2005 share repurchase target to $2 billion. With a current market capitalization of $22.9 billion, that amounts to 8.7% of the stock outstanding -- assuming prices remain unchanged, which they will not.

The company projects earnings between $1.35 and $1.42 in 2005, down from the $1.78 earned in 2004. Earnings for 2006 are pegged between $1.62 and $1.72 a share. Based on the high end of 2006 guidance, the stock trades for 12.5 times forward earnings. That's cheap for a company that analysts expect will grow earnings at 13% a year for the next five years -- far outdistancing the S&P 500's 10.6% compounded annual growth.

Cendant is emerging from its transformation into a highly focused real estate and travel company -- perhaps a highly cyclical company on account of it.

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Fool contributor W.D. Crotty does not own shares in any of the companies mentioned.