Expedia vs. Trip.com: Which Travel Stock is a Better Buy?

Expedia Group, Inc. (EXPE) operates internationally as an online travel company. The company operates through Retail, B2B, and trivago segments. Its brand portfolio includes Brand Expedia, Hotels.com, Vrbo, and CarRentals.com. On the other hand, Shanghai-based Trip.com Group Limited (TCOM) operates as a travel service provider for accommodation reservation, transportation ticketing, packaged tours and in-destination, corporate travel management, and other travel-related services worldwide.

Governments worldwide are reinstating lockdowns and travel restrictions to limit the spread of the highly transmissible omicron variant of coronavirus. However, most travel companies have been witnessing solid leisure and business travel demand. Moreover, as more people get vaccinated, travel companies should see increasing demand for their services. According to a Technavio report, the travel market is expected to grow at a CAGR of 13.9% from 2021 to 2026. Therefore, both EXPE and TCOM should benefit.

EXPE has gained 12.2% over the past three months, while TCOM has delivered negative returns over this period. Moreover, EXPE is the clear winner with 26.1% gains versus TCOM’s negative returns in terms of the past year’s performance.

But which of these two stocks is a better buy now? Let’s find out.

Latest Developments

On November 4, 2021, Peter Kern, EXPE’s Vice Chairman, and CEO, said, “With early positive signs in Q4 and many countries announcing new openings to international travelers, we are feeling increasingly confident about a continued recovery.”

On November 17, 2021, TCOM signed a strategic global agreement with Wyndham Hotels & Resorts, the world's largest hotel franchising company. Ray Chen, CEO of Accommodation Business at TCOM, said, “This agreement will enrich our accommodation inventory for travelers and ensure that we remain their go-to travel companion as regional and global travel recovers.”

Recent Financial Results

EXPE’s revenue increased 97% year-over-year to $2.96 billion for the fiscal third quarter ended September 30, 2021. The company’s adjusted EBITDA grew 181% year-over-year to $855 million, while its adjusted net income came in at $553 million compared to a loss of $31 million in the prior-year quarter. Also, its EPS came in at $3.53 compared to a loss of $0.22 in the year-ago period.

TCOM’s net revenues increased 86% year-over-year to $912 million for the fiscal second quarter ended June 30, 2021. The company’s adjusted EBITDA grew 638.7% year-over-year to $142 million, while its non-GAAP net income came in at $112 million compared to a loss of $181.12 million in the prior-year quarter. Also, its non-GAAP EPS came in at $0.18 compared to a loss per share of $0.30 in the year-ago period.

Past and Expected Financial Performance

EXPE’s total assets grew at a CAGR of 4.7% over the past three years. Analysts expect EXPE’s revenue to increase 151.7% for the quarter ending December 31, 2021, and 65.8% in fiscal 2021. The company’s EPS is expected to grow 126.1% for the quarter ending December 31, 2021, and 852.1% in fiscal 2022.

On the other hand, TCOM’s total assets grew at a CAGR of 4.7% over the past three years. The company’s revenue is expected to increase 2.5% for the quarter ending December 31, 2021, and 12.6% in fiscal 2021. Its EPS is expected to decline 99.7% for the quarter ending December 31, 2021, but grow 526.1% in fiscal 2022.

Profitability

EXPE’s trailing-12-month revenue is 2.29 times what TCOM generates. EXPE is also more profitable with a gross profit margin of 80.19% compare to TCOM’s 79.46%.

However, TCOM’s ROE, ROA, and ROTC of 3.46%, 0.10%, and 0.11% compared with EXPE’s negative values.

Valuation

In terms of forward EV/S, TCOM is currently trading at 5.60x, 60% higher than EXPE’s 3.50x. Moreover, TCOM’s forward EV/EBITDA ratio of 92.86x is 328.1% higher than EXPE’s 21.69x.

So, EXPE is relatively affordable here.

POWR Ratings

EXPE has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, TCOM has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

EXPE has an A grade for Growth, consistent with analysts’ expectations that its EPS will increase in the upcoming months. On the other hand, TCOM has a C grade for Growth, in sync with analysts’ expectations that its EPS will decline in the near term.

Moreover, EXPE has a grade of B for Quality. This is justified given EXPE's 24.86% trailing-12-month levered FCF margin, 297.6% higher than the industry average of 6.25%. On the other hand, TCOM has a Quality grade of C, in sync with its negative trailing-12-month levered FCF margin, compared to the industry average of 6.25%.

Of the 77 stocks in the Internet industry, EXPE is ranked #7. However, TCOM is ranked #29 of 52 stocks in the China group.

Beyond what I’ve stated above, we have also rated the stocks for Value, Momentum, Stability, and Sentiment. Click here to view all the EXPE ratings. Also, get all the TCOM ratings here.

The Winner

Thanks to the extensive vaccination drive, the travel industry is rebounding as the economy is reopening. While both EXPE and TCOM are expected to grow in the long run, it is better to bet on EXPE now because of its lower valuation and better growth prospects.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Internet industry here. Also, click here to access all the top-rated stocks in the China group.

EXPE shares were trading at $154.20 per share on Friday afternoon, down $7.08 (-4.39%). Year-to-date, EXPE has gained 16.47%, versus a 21.53% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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