Let's talk about the popular Expedia Group, Inc. (NASDAQ:EXPE). The company's shares saw a significant share price rise of 21% in the past couple of months on the NASDAQGS. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Expedia Group's outlook and valuation to see if the opportunity still exists.
What Is Expedia Group Worth?
According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. We find that Expedia Group's ratio of 21.75x is trading slightly above its industry peers' ratio of 19.29x, which means if you buy Expedia Group today, you'd be paying a relatively reasonable price for it. And if you believe that Expedia Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that Expedia Group's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Expedia Group look like?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to more than double over the next couple of years, the future seems bright for Expedia Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? EXPE's optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven't considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at EXPE? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you've been keeping tabs on EXPE, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for EXPE, which means it's worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 2 warning signs for Expedia Group you should be aware of.
If you are no longer interested in Expedia Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com