Stock Analysis

At US$8.67, Is Travelzoo (NASDAQ:TZOO) Worth Looking At Closely?

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NasdaqGS:TZOO
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Travelzoo (NASDAQ:TZOO), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$13.32 and falling to the lows of US$8.67. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Travelzoo's current trading price of US$8.67 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Travelzoo’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Travelzoo

What's the opportunity in Travelzoo?

According to my 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, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Travelzoo’s ratio of 24.3x is trading slightly below its industry peers’ ratio of 25.46x, which means if you buy Travelzoo today, you’d be paying a decent price for it. And if you believe that Travelzoo should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that Travelzoo’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 kind of growth will Travelzoo generate?

earnings-and-revenue-growth
NasdaqGS:TZOO Earnings and Revenue Growth January 24th 2022

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 Travelzoo. 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? TZOO’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 track record of its management team. Have these factors changed since the last time you looked at TZOO? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on TZOO, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for TZOO, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. You'd be interested to know, that we found 3 warning signs for Travelzoo and you'll want to know about them.

If you are no longer interested in Travelzoo, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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