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Travelzoo (NASDAQ:TZOO), might not be a large cap stock, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. The recent share price gains has brought the company back closer to its yearly peak. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Travelzoo’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for Travelzoo
What's The Opportunity In Travelzoo?
Good news, investors! Travelzoo is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 Travelzoo’s ratio of 18.1x is below its peer average of 25.71x, which indicates the stock is trading at a lower price compared to the Interactive Media and Services industry. However, 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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Travelzoo 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. Travelzoo's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? Since TZOO is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on TZOO for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy TZOO. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.