Expedia (EXPE)

I started looking at Expedia about 2 months ago when they released their earnings in Feb-11. The stock had a fast drop from $25 to $22 a share and then dropped further to $20/share. As I reviewed their financials, they had strong earnings, sufficient cash, and trading well below the 50-day and 200-day moving averages. But what really sold me was comparing Expedia to its main competitors: Priceline, TravelZoo and Orbitz. Travelzoo has a P/E of 95 and weak earnings - looks more like I should short this stock. Orbitz is just sucking wind with negative earnings, low cash and negative growth. Priceline is a strong established company with $3B in sales, $838M EBITDA and market cap of $25B with a P/E of 49. But Expedia has almost the mirror image of financial performance with $3B in sales, $824M EBITDA but has market cap of $6.8B and P/E of 15. Expedia has also grown at about the same rate as Priceline over the last 2 year sand Expedia pays a dividend! How can this not be a good buy!

Priceline has more cash and less debt which is a big reason for the higher P/E. Expedia had a negative operating cash flow of $160M and overall cash loss of $236M while Priceline generated $179M in operating cash but had a negative cash flow for 2010 because of large capital investments. Expedia has a current ratio of .9 and Priceline is at 4.15 which is another big reason for the higher P/E and valuation.

However, I like Expedia to get to the $27-28 range this year. I personally bought 500 shares at $20.90 and today the stock jumped to $25/share. Expedia made an announcement about spinning off their TripAdvisor business which contributed to the jump in stock price. I feel like the travel industry is finally recovering from the recession and should start to see stronger growth over the next 2 years. I work in the travel industry so I am very interested to see the progress of all these stocks.

Tell me what you think about Expedia and the travel industry stocks?