Booking Holdings Stock Profile

BKNG:NASDAQ

Having just used this company’s services recently, I am very excited to profile Booking Holdings this week. Booking Holdings is a leader in online travel booking sites and you will be more familiar with the following brands underneath its umbrella: Booking.com, Priceline.com, Kayak, Agoda (this serves accommodation rentals in Asia), Rentalcars.com and OpenTable. Check out its great homepage:

 Courtesy of  Bookingholdings.com

I have personally used Booking.com and OpenTable on a variety of occasions, both to great success. I recently used Booking.com to book accommodation in Europe for a summer vacation. To be honest, I was thrilled with the service on Booking.com. I started looking around for accommodation and landed on Booking.com only to realize that all of the places I was considering have free cancellation up until around 2 weeks before we arrive! So, realizing there was almost zero downside to booking these places, I booked and have these reservations safely in hand as I narrow down our itinerary. Is anyone else as thrilled about this feature as I am?!? It  makes planning much easier when you can lock in a good price, with zero concern about cancelling, and work on figuring out your plans as you get closer to the date.

The options were numerous on Booking.com as well, with detailed descriptions of each place along with reviews. From my searches, I found there was a mix of brand name hotels, small guest houses and B and B’s. The selection was one of the better ones I have seen on these types of sites. Frankly, I was blown away by the overall range and user-friendly nature of Booking.com (maybe I am easily impressed!). I have never seen so much relevant and helpful information and I am familiar with quite a few accommodation booking sites. I have also used OpenTable but have less to say about it other than it also was easy to use. I will definitely be using both of these services and checking out the other sites as required.

Apparently, many others share my opinion about Booking.com as the share price is currently $2,032! Yes, you read that right, one share of this company (formerly Priceline) will cost you over $2,000. Obviously, the price is all relative to a number of factors concerning the business and on its own is not all that informative, but still, that is very expensive compared to the price of other stocks considered on this site. Let’s take a look into what it has planned for the future.  

·      As stated many times on this site, I, nor ZSM Creative Inc. operating as The Capital Pink, are financial advisors and have no financial accreditations. I am applying some basic evaluation tools to this stock along with some commentary but this should only serve as a starter for your further research. The information below is only current to the day this post was written which may or may not be the same day as this post was published so please update the ratios and numbers to the current day before relying on them as they may have significantly changed (see How Do I Evaluate a Stock? (Part One) for information on where to find the ratios and numbers online). Please read my Legal Disclaimer.  Also, I do not own Booking Holdings stock and am not affiliated with them in any manner.    

What is Booking Holdings?

Priceline Group purchased Booking.com in 2005 and it recently decided to change its name to Booking Holdings. It is suggested that Booking.com had more global name recognition, which did assist Priceline after its post-IPO struggle to get momentum. Today’s stock price of around $2,000 is up almost 30,000% from Priceline’s low point in 2002. Booking Holdings trades on the Nasdaq Global Select Market under the symbol BKNG. Its head office is located in Connecticut and employees around 22,000 employees globally.

 Courtesy of Bookingholdings.com

Courtesy of Bookingholdings.com

Here are some investor information highlights regarding Booking Holdings:

·      World’s leading provider of online travel & related services, serving over 220 countries;

·      Over $81.2 billion in gross bookings in 2017;

·      Forbes ranked as one of the world’s most innovative companies and most admired and Fast Company ranked as a world’s most innovative company;

·      In 2017, 673 million room nights were booked across platforms;

·      Works with more than 1.2 million properties and more than 40,000 restaurants;

·      Well over 1,000 live experiments running across its websites and apps to determine what its customers are looking at and what matters to the customers;

·      One of the largest e-commerce businesses in the world;

·      Last year had double-digit growth and an increase in gross travel bookings;

·      Repurchased 763,000 shares during 2016 (recall what we have discussed before about the meaning of share repurchases and how usually, they represent a positive step);

·      Future involves working on the technology for a seamless customer experience, examples include: skipping hotel check in and going straight to your room where you can unlock it with your phone; mini-bar stocked with your preferences; local restaurants competing for your business a few hours before mealtime through personalized offers; and restaurant menus while abroad in your own language. Interesting to think of the possibilities! and

·      Profit and earnings both growing.

It is clear from its website and in particular, the 2016 Annual Report, that Booking Holdings is not one to rest on its laurels. It recognizes that the space it is in, e-commerce, is constantly changing and you must innovate or perish. It certainly seems to have the future in mind with all its innovations.

What is Booking Holding’s stock doing?

As at April 3, 2018, the numbers from our basic stock evaluation tools are as follows:

Share price: $2,030.86 USD

One share of Booking Holdings would cost you $2,030.86 USD.  The price over the past 52 weeks has ranged from $1,630.56 to $2,228.99 USD. As mentioned above, this stock has really skyrocketed over the last 10 years or more. It is very expensive and the priciest stock we have covered to date on this site.

Price to Earnings (P/E): 44.40 Current (Consensus Forward P/E is 23.75)

Recall this is the stock price divided by the earnings per share. If the P/E is high, you should expect to get some growth for having paid a bit more for the stock however, it could indicate the stock is overvalued. The Index P/E is 21.40 so Booking Holdings is higher than the index. The 5-yr average P/E is 31.56 so it is currently higher than this metric as well. The current P/E of 44.40 is also higher than it was in 2017 at 24.37. This could suggest the stock is overvalued or it could mean more growth is expected from investors.   

Dividend Yield: --

Dividend paying stocks are something many investors look to buy as they are like an interest rate on your shares. Dividend payouts are discretionary. Dividend yield represents the amount the company pays out in dividends relative to its share price. While a higher dividend yield is usually more desirable, you still need to consider the health of the underlying company before making a generalization either way. No dividend yield ratio was available for Booking Holdings as it is not paying a dividend at this time. The investor tab on its website indicates this as well.  

Earnings per Share (EPS): 46.86

This figure will tell you a great deal about the growth of the company. It takes what the company earns and divides it by the number of shares outstanding. It is essentially the profit allocated to each share of the company. The bigger the number the better because the more the company earns, the more attractive it is to investors. EPS that is increasing every quarter shows earnings momentum and shows growth potential. Booking Holding’s EPS has generally been increasing over the past five years although it has plateaued somewhat since 2014. Generally speaking however, this EPS number is one of the largest we have seen on the companies on the site.

Revenue: $12.68 Billion

Increasing revenue is a good sign that the company is growing. Booking Holding’s revenue has been steadily increasing over the past five years with a 5-yr growth of 19.24%. This steady, increasing revenue growth is a good sign and has no doubt been reflected in the stock price gains  noted above.

Return on Equity (ROE): 22.20

ROE tells you what sort of return the company is getting on the shareholders money. An increasing ROE is a good sign. Booking Holding’s ROE has been decreasing somewhat over the past five years.

Market Capitalization: 98.0674 Billion

Booking Holdings is a large cap stock.  Recall that small cap stocks usually have the most room for growth as opposed to large, established, stable large cap companies and medium fall somewhere in the middle. Booking Holdings is a large cap stock but appears poised for more growth as well which is interesting.

Net Profit Margin: 18.46 (TTM)

This ratio tells us what profit is left over after the company pays its expenses for the year. The more money it keeps, the better. High net profit margins mean that a company is good at keeping profit after expenses are paid, which may mean they are adept at keeping their expenses down. It is a good idea to compare these over an industry to see what companies are good at operating and maintaining a high net profit margin.

Free Cash Flow per Share: 84.88

Recall that this number is the cash flow through the business divided by the number of shares outstanding. It represents the net cash a company can produce per share and many investors consider this a better indicator of a company’s health than the more popular, earnings per share ratio because it is more difficult to manipulate cash flow numbers than it is earnings numbers. A higher value usually indicates the company is in a healthier position. 

This ratio should be considered along with the EPS figure for a better picture of the company’s health as there should not be a wide discrepancy between the two figures. If there are large variances between those numbers, you may want to consider if there were large, non-recurring one-time items that account for the large variance. It is also wise to look at a company’s cash flow picture in the long term as that should take into account one-time, large capital expenditures (money spent by a company to buy or maintain an asset like land, buildings or equipment, i.e. “fixed assets”) that required large amounts of cash. Booking Holding’s free cash flow per share at 84.88 would seem to be quite healthy.   

Price to Sales (P/S): 8.20

This ratio compares the total market value of the company with its sales revenues. There is not a great deal of manipulation a company can do with its sales data, so this can be a good indicator of how well the company is doing. Recall that a lower ratio relative to its peers in the industry can indicate a potentially good investment opportunity. Morningstar indicates the index is 2.13 so Booking Holdings is higher than the index.  

Price to Book (P/B): 8.92

This compares the stock price with how much the stock would be worth if the company was liquidated or sold off. It is the value of the stock in comparison to the underlying assets of the company. Thus, a low P/B relative to the stock price suggests you are not paying too much for what would be left over after such a sell off. Morningstar states that the index for P/B is 3.08.

Price to Cash Flow (P/CF): 22.29

Having cash left over after expenses are paid off is crucial to remaining in business so this is a good indicator about the health of a company. Generally lower is better as it could indicate the company is obtaining large cash flows not yet reflected in the stock price. Morningstar indicates the index is 13.75 so Booking Holdings is higher on this metric.

This completes a basic evaluation of Booking Holdings. As always, there are tons of articles and discussions online about this stock and all stocks, so they are also a good place to look at for further consideration. I am really excited about this company but am also interested to see what the stock price does given it is currently quite high. Will it go even higher?! The e-commerce industry is constantly changing so it will remain to be seen if Booking Holdings can keep pace. Judging from its Annual Report however, it is committed to constant innovation. I for one will continue using Booking.com, and most likely its other platforms, as I was extremely impressed with it for booking international accommodation.

  

*** Top photo courtesy of Priscilla du Preez on Unsplash