trivago N.V. (TRVG) and its subsidiaries operate a hotel and lodging search platform worldwide. The Düsseldorf, Germany-based concern provides an online meta-search for hotels and lodging via online travel companies, hotel chains, and independent hotels. The platform is accessible through 53 specialized websites and applications in 31 languages. TRVG’s shares have gained 13.1% in price over the past three months to close yesterday’s trading session at $2.33.
In terms of forward non-GAAP P/E, the stock is currently trading at 14.89x, which is 17% lower than the 17.94x industry average. Also, its 0.88x forward EV/Sales is 61.7% lower than the 2.30x industry average. Furthermore, TRVG's 1.04x forward Price/Book is 56.3% lower than the 5.45x industry average.
In addition, analysts expect TRVG's revenues and EPS to rise 63.8% and 200%, respectively, year-over-year to $653.62 million and $0.09 in its fiscal year 2022. TRVG's EPS is expected to rise at a 40.9% CAGR over the next five years. Furthermore, the company has an impressive earnings surprise history; it topped the Street’s EPS estimates in three of the trailing four quarters.
Here is what could shape TRVG's performance in the near term:
Rising Travel Demand
Booking sites in the United States are witnessing increased demand for spring and summer leisure travel as COVID-19 restrictions ease. Consumers appear to be disregarding higher prices for plane tickets and road journeys due to rising fuel prices. "We are seeing strong booking activity for spring break and the beginnings of a very strong summer," said Jamie Lane, VP of research at AirDNA, which monitors the daily performance of more than 10 million properties on vacation rental sites Airbnb and Vrbo.
Robust Financials
During the fourth quarter, ended Dec. 31, 2021, TRVG's total revenue increased 175.6% year-over-year to €89.13 million ($98.12 million). Its operating income came in at €13.18 million ($14.51 million) compared to a €9.34 million ($10.28 million) operating loss. The company reported €15.21 million ($16.74 million) in net income, compared to a net loss of €8.64 million ($9.51 million). Its EPS amounted to €0.04, compared to a €0.02 loss per share.
Impressive Growth Prospects
The Street expects TRVG's revenues and EPS to rise 63.8% and 200%, respectively, year-over-year to $653.62 million and $0.09 in its fiscal 2022. In addition, TRVG's EPS is expected to rise at a 40.9% CAGR over the next five years. Furthermore, the company has an impressive earnings surprise history; it topped the Street’s EPS estimates in three of the trailing four quarters.
Consensus Rating and Price Target Indicate Potential Upside
Among the six Wall Street analysts that rated TRVG, one rated it Buy, and five rated it Hold. The $3.24, 12-month median price target indicates a 39.1% potential upside. The price targets range from a low of $2.60 to a high of $3.70.
POWR Ratings Reflect Solid Prospects
TRVG has an overall grade of A, which equates to a Strong Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. TRVG has an A grade for Quality, Growth, and Value. TRVG's solid earnings and revenue growth potential are consistent with the Quality and Growth grades. In addition, the company's lower-than-industry multiples are in sync with the Value grade.
Among the 72 stocks in the Internet industry, TRVG is ranked #1.
Beyond what I stated above, we have graded TRVG for Sentiment, Stability, and Momentum. Get all TRVG ratings here.
Bottom Line
As the world recovers from COVID-19 related disruptions, travel companies are witnessing heightened demand across their platforms. This has helped TRVG report solid fundamental performance in the last quarter. In addition, given favorable analysts' sentiments and the company's solid growth attributes, the stock looks highly undervalued at current price level. So, we think the stock could be a great bet now.
Note that TRVG is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.
How Does trivago N.V. (TRVG) Stack Up Against its Peers?
TRVG has an overall POWR Rating of A, which equates to a Strong Buy rating. This rating is superior to its peers within the same industry, such as Expedia Group Inc. (EXPE), Alphabet Inc. (GOOGL), and Sify Technologies Limited (SIFY), which all are rated C (neutral).
Note that EXPE is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
TRVG shares fell $0.11 (-4.72%) in premarket trading Wednesday. Year-to-date, TRVG has gained 6.88%, versus a -5.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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