5 Reasons Ctrip.com Is Dirt Cheap
Robert is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
With Ctrip.com (NASDAQ: CTRP) down nearly 40% over the past year and trading just off 52-week lows, I decided to take a closer into the company to see if there is any reason to be excited about the stock at these prices. Here are the five points I looked at while researching the company:
Valuation: Ctrip’s trailing 5 year valuation metrics suggest that the stock is undervalued as all of the three metrics are in the lower end of their respective 5 year ranges. Ctrip’s current P/B ratio is 3.6 and it has averaged 9.7 over the past 5 years with a high of 19.1 and low of 3.6. Ctrip’s current P/S ratio is 7.3 and it has averaged 14.6 over the past 5 years with a high of 23.4 and low of 7.1. Ctrip’s current P/E ratio is 24.2 and it has averaged 43.6 over the past 5 years with a high of 74.2 and low of 24.2.
Price Target: The consensus price target for the analysts who follow Ctrip is $40.50. That is upside of 47% and suggests that the stock is undervalued at these levels and has room to run.
Forward Valuation: Ctrip is trading at about $28 a share with analysts expecting the company to report EPS of $1.29 per share next year for a forward P/E of 22. Revenue growth is expected to be 25% y/y. According to Yahoo! Finance, competitors include eLong (NASDAQ: LONG) and Expedia (NASDAQ: EXPE). eLong is trading at about $17 a share and analysts expect the company to report earnings of $0.49 per share next year for a forward P/E 35. Revenues are expected to increase 27%. Expedia is trading at $31 a share and analysts are expecting the company to report earnings of $2.91 per share next year for a forward P/E of 11. Revenues are expected to rise 10%. The forward valuation based on competitors suggests that the stock is trading at about fair value as its competitors have different multiples but also different growth rates.
Earnings Estimates: Ctrip has beat earnings estimates 3 out of the past 4 quarters but the margins have been coming down. For 4Q10, the company beat EPS estimates by 6 cents. The last two beats were just 2 cents. This suggests that analysts are getting a better grip on the company’s results.
Price Action: As mentioned above, the stock has struggled this year. After having a stable first half of the year, the stock dropped in early August and continued dropping through the fall and winter. It only recently has found some support, in the $22 area, and has rallied to its current level of about $27.50 a share. Ctrip currently sits above its 50 day moving average of $25 but below its 200 day moving average of $37. Support on the downside includes the $24 area followed by $22. On the upside, the $28 area followed by the $30 area should provide solid resistance.
Motley Fool newsletter services recommend Ctrip.com International. The Motley Fool owns shares of Ctrip.com International. Vatalyst has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
