Up 55% In 1 Month, is Travelzoo (NASDAQ: TZOO) Still A Buy?


Travelzoo (NASDAQ: TZOO) investors have enjoyed seeing the stock price increase by 57.4% over the last month. As a small-cap stock, hardly covered by analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. However, could the stock still be trading at a relatively cheap price? Let’s take a look at the company’s expected growth and valuation based on its most recent financial data to see if there is further upside moving forward.

Is Travelzoo Still Cheap?

The stock seems fairly valued at the moment according to 8 separate valuation analyses. Shares are trading roughly 10% above its intrinsic value. This means if you were to buy Travelzoo today, you’d be paying a reasonable price for it. If you believe that the stock is really worth $10.99, then there isn’t much room for the share price to appreciate beyond where it’s currently trading.

Travelzoo Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF Revenue Exit $13.63 11.7%
5-yr DCF Revenue Exit $16.97 39.1%
10-yr DCF EBITDA Exit $11.51 -5.7%
5-yr DCF EBITDA Exit $13.70 12.3%
Peer EBITDA Multiples $10.33 -15.3%
10-yr DCF Growth Exit $6.18 -49.3%
5-yr DCF Growth Exit $6.17 -49.4%
Peer P/E Multiples $9.44 -22.6%
Average $10.99 -9.9%

Click on any of the analyses above to view the latest model with real-time data.

In addition, it seems like Travelzoo’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its beta of 0.34.

What Does The Future Of Travelzoo Look Like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.

Travelzoo projected net income chartsource: finbox.io data explorer

Travelzoo’s earnings growth is expected to average -6.7% over the next five fiscal years. This could indicate that the core business is not doing very well or that margins are coming under pressure.

How This Impacts You

Many investors separate stocks into value and growth categories based on quantitative metrics. However, one of the most famous investors in the world views this as foolish. In Warren Buffett’s 1992 letter to Berkshire Hathaway shareholders, Buffett touches upon a subject at odds with much of the investment industry:

“Most analysts feel they must choose between two approaches customarily thought to be in opposition: ‘value’ and ‘growth.’ Indeed, many investment professionals see any mixing of the two terms as a form of intellectual cross-dressing. We view that as fuzzy thinking… In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value.”

While investors tend to categorize stocks into value and growth, some of the most successful investors view growth as simply one component of a company’s value.

Travelzoo’s future growth is relatively low and the stock appears fairly valued at the moment according to our valuation models. As a shareholder, you may have already conducted your fundamental analysis on the company and the stock’s recent appreciation may have been expected. Therefore, it may be time for investors to take some chips off the table. For prospective investors looking to purchase shares of Travelzoo, it may be worth holding off until the stock develops a larger margin of safety.

But before making an investment decision, I recommend you continue to research Travelzoo to get a more comprehensive view of the company by looking at:

Risk Metrics: what is Travelzoo’s CapEx coverage? This is the amount a company outlays for capital assets for each dollar it generates from those investments. View the company’s CapEx coverage here.

Valuation Metrics: what is Travelzoo’s price to book ratio and how does it compare to its peers? Analyze Price / Book here.

Efficiency Metrics: inventory turnover is a ratio that measures the number of times a company’s inventory is sold and replaced over the year. View Travelzoo’s inventory turnover here.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

Expertise: Valuation, financial statement analysis. Matt Hogan is also a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock. His work is frequently published at InvestorPlace, Benzinga, ValueWalk, AAII, Barron’s, Seeking Alpha and investing.com. Matt can be reached at matt@finbox.io or at +1 (516) 778-6257.

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