Good Report On Financial Analysis: Priceline V/S Expedia
Referring to our analysis conducted for both the companies, we are assured that Priceline is an above average buy stock. Our recommendation is based on the following rationales:
In terms of profitability, the company outshines the performance of Expedia. During 2011, the operating margin of the Priceline was 32.12% which increased consistently to 35.51%. On the other hand, Expedia was struggling with declining operating margins that stood at 7.67% by the end of 2013.
The similar trend was witnessed in the Earnings per Share multiple where Priceline registered consistent increase in the multiple from 20.63 in 2011 to 36.11 in 2013, Expedia, on the other hand, indicated a tumbling EPS numbers that fell from $3.41 in 2011 to $1.67 in 2013.
ii)Stronger Free Cash Flow:
Another point that goes in the favor of Priceline is significantly higher free cash flow than Expedia. Below is the comparative summary and graph of FCFF position of both the firms:
iii) Lower financial risk:
Referring to the capital structure composition of both the companies, we found that the proportion of debt financing(31.01%) in Priceline is relatively lower than that of Expedia(48.09%). Hence, the former company is exposed to less financial risk than the latter.
Thus, on the basis of above rationales where we witnessed that Priceline is having a positive 3 year financial trend, we can conclude that the company is relative a better buy option than Expedia.