First Cut Stock Study Report

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Cora Hoover
5 years ago
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1 First Cut Stock Study Report Company Name: Priceline, Corp Ticker: PCLN Date of Study: 3/29/2014 Price: $ Your Name: address: Bob Houle bob.houle@gmail.com City: Melbourne State: FL Chapter Name (if applicable): Space Coast Discuss why you consider this to be a high quality, growth company that should be investigated further. Please include comments on historical sales and EPS growth, pre-tax profit margin, return on equity, and debt. PCLN is largest online travel company in the world based on revenues (EXPE #1 on gross bookings). It provides its customers a broad range of travel services which include bookings for hotel stays, airline tickets, car rentals, cruises and vacation packages via its online travel portals: priceline.com, booking.con, agoda.com, rentalscars.com, breezenet.com and lowestfares.com. Its websites connect travelers with suppliers of different travel products such as hotels, airlines, cruises and car rental companies. Overview: PCLN's 1 & 3 year sales, operating income and EPS historically higher than S&P500 and Industry (Leisure) but slowing last 3 months, dipping below industry and S&P500 for first time in 5 years. Could this be a buying opportunity? Or early signals that this premium-priced (PE 33+, PEG 1.6) issue returning to mean or worse? That's the focus of this stock study. Growth assessment: - last 5 historical sales growth 30%, last 2 slowing to 24.9%; latest Q/Q up 29.4% or 2.5 X higher than OWW & EXPE but lower than CTRP s ~40% - last 5 historical EPS growth 52.7%, last 2 slowing to 32.3%; latest Q/Q up 27.1%. Peers lower, erratic, slowing. Management assessment: PTP% leveling ~ 34%, stable, peers lower, falling. ROE 2 times higher than peers, slipping to 27.2%*, a 5 year low; peers lower. Debts slight up trend but modest, well below 10 year profile, well below and steadier than peers. Leverage assessment: Healthy balance sheet, ratios. Track record of leveraging debt for top/bottom line improvements. This stock study reflects the judgment of the contributor(s) only and no investment recommendation is intended. Investors should always conduct their own analysis before making an investment decision. This report may reference websites, products or services not endorsed by BetterInvesting and that may require usage fees. The preparer(s) of this report is not endorsing or promoting the use of these websites, products or services.

2 Misc: No dividends, no plans foreseeable future (using $ to fund expansion). No plans for stock split though mark speculation abounds based on breaking $1K price ceiling *ROE in SSGPlus based on end-of-year equity vice preferred beginning of year (' % vice 27.2%). Results in grossly different metrics though general trend similar (downward trend). Briefly describe how the company makes money: Online travel company that connects consumers wishing to make travel arrangements with providers of travel services around the world. Transaction fees for online bookings account for the bulk of revenue and profits; majority of revenues and future growth potential based on international expansion. Projected growth rate for sales: 18% Why did you select this rate? Discuss from where future growth will come. 20.6% next 2 yrs [SSG+], VL %, 22% SnP, M*15%, ACE 20.6%. Used 18% since I expect slowing over next 5 due to macroeconomic weaknesses, continued intense competition, rapidly changing technologies and shifting consumer habits. Also intensifying competition from Expedia, Trip Projected growth rate for earnings per share: 17.8% Why did you select this rate? Computed using Preferred Method based on pre-tax profit % appears stabiliziing ~33% with headwinds (discussed above) putting pressure limiting further significant expansion. Defaults accepted for taxes (17.6%) and # shares (51.6M). Used current ttm EPS as base for EPS growth to $81.92 out 5 years. Projected High P/E: 25 Why did you select this value? Current average PE 33.1, 13 high PE was 33.2, 5 yr avg 29.5 (after removing outliers '09 and '10. Using 25 for PEG 1.4 (25/17.8) Projected Low P/E: 15 Why did you select this value? 5 yr avg low PE = 17.6 after removing '09 outlier, 13 was 17.4, trending down. Using 15 to reflect downward trend and expected market's lower enthusiasm when/if PCLN misses optimistic earnings forecast over next year. Projected Low Price: $36.01 Why did you select this value? This stock study reflects the judgment of the contributor(s) only and no investment recommendation is intended. Investors should always conduct their own analysis before making an investment decision. This report may reference websites, products or services not endorsed by BetterInvesting and that may require usage fees. The preparer(s) of this report is not endorsing or promoting the use of these websites, products or services.

3 Used trailing 12 months EPS vice future 12 months to avoid inflating the 3.0::1 US/DS and remain conservative. This does lower the max buy price below price needed to achieve 15% total return (TR). Will revisit judgment at quarterly reviews. At the current price, the stock is a (check one): Buy or Hold or Sell At the current price, the upside-downside ratio is: 1.3 to 1 Projected compounded rate of return: 11.4% Your final recommendation (check one): Buy or Hold or Sell Explain: Target return: At ~ $7M, large company, 8-12% but I'm requiring 12-15% to factor in risk posed by potential disruptive technology in online bookings that would drastically reduce margins. At current price TR 11.4%, PAR 6.6%. Max price satisfying15%tr return and US/DS $917. For 15% target return could buy up to $1018 but that would exceed US/DS 3.0::1 constraint (US/DS at $1018 would be 2.2::1). PCLN good, quality company with very competent management and exceptional business model in high growth but cyclical indusrty. Would love to own but price too high (though looking back wish our club had bought year ago when in mid-$700's though even then thought it was overpriced). This stock study reflects the judgment of the contributor(s) only and no investment recommendation is intended. Investors should always conduct their own analysis before making an investment decision. This report may reference websites, products or services not endorsed by BetterInvesting and that may require usage fees. The preparer(s) of this report is not endorsing or promoting the use of these websites, products or services.

Use the SSG as a True Investment Guide 9/7/2016. Rocky Mountain Chapter Annual Meeting 1

Use the SSG as a True Investment Guide Rocky Mountain Chapter Annual Meeting Special Presentation September 7, 2016 Use the SSG as a True Investment Guide Presented by John Rogers, Director of the Rocky