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.
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