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Sizzling Summer Smackdowns

08.02.2011

Smackdown #1: Priceline vs. Expedia

Priceline.com was one of the first in a slew of companies to take advantage of the online travel business. Through its website, Priceline allows customers to search for and book rooms at thousands of lodging accommodations throughout the world, compare and book flights from competing airlines and place car rentals.

The site has gained tremendous popularity thanks to its aggressive advertising campaigns, variety of services and the option for customers to negotiate prices. In the last five years, the stock has gained more than 57%, with growth estimates topping 50% for this year as well. Even with recent lags in the travel industry, Priceline has managed to expand thanks to the cheap prices it affords hopeful travelers. And its fundamentals continue to grow stronger, which indicate long-term success for the position.

Fundamental Grade:

B

Sales Growth

A

Operating Margin Growth

D

Earnings Growth

A

Earnings Momentum

A

Earnings Surprises

B

Analyst Earnings Revisions

B

Cash Flow

C

Return on Equity

A

Quantitative Grade

A

 

 

Total Grade:

A


Now let's take a look at Expedia. The company offers many of the same services as its opponent, Priceline, including airfare, lodging options, car rentals and even cruise options. Expedia also offers domestic and international travel options.

Through all its subsidiaries, the company operates several well-known and successful travel brands including, Expedia.com, hotels.com and hotwire.com. Like Priceline, the company was able to profit during the lull in the travel industry thanks to cheap prices and strength in its international business. However, the stock has not performed quite as consistently as PCLN, and its fundamentals prove a little choppy.

Fundamental Grade:

C

Sales Growth

C

Operating Margin Growth

B

Earnings Growth

D

Earnings Momentum

D

Earnings Surprises

D

Analyst Earnings Revisions

B

Cash Flow

B

Return on Equity

B

Quantitative Grade

B

 

 

Total Grade:

B


Priceline has the stronger fundamentals, the better earnings history and the buying pressure that make it a strong buy all day long. Expedia still ranks a buy in my grading system, but only one stock can win the smackdown. And the overwhelming winner is Priceline.

Now that you see how the smackdown works, let's put two more contenders in the ring and let them battle it out for the honor of being a top stock this summer.

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