operates in a industry that is absolutely on fire. Estimates are through the roof and earnings are expected to double this year.
Are shares this Zacks #1 Rank (Strong Buy) in a tailspin? or are they oversold and a great buying opportunity?
Travelzoo Inc. is a worldwide travel website that offers discounted vacations through more than 2,000 companies.
Net Income Takes Off
The company's last quarterly report was back on Apr 21 and included a 30% jump in revenues, to $37 million. That is the highest in Travelzoo's history. Net income surged 144%, to $6.0 million.
Earnings per share delighted Wall Street, coming in at $0.37 which was 9 cents higher than expected.
Not surprisingly, the full-year consensus estimates are up big. The average forecast for 2011 is up 54 cents, to $1.63 per share. Next year's outlook is calling for $2.26, up 78 cents.
Given the $0.80 Travelzoo made in 2010, the annual growth rates are projected to be 103% and 39%, respectively. Not bad at all.
Are Shares a Deal?
Right now the stock is trading at roughly 35 times forward estimates. That is not exactly going to cater to value investors, but when you consider the 27% long-term growth rate, you get a PEG of 1.3, showing fairly priced growth potential.
I am not crazy about the sky-high P/B and P/S though.
Red Hot Industry
Groupon has put the daily deals industry in the spot light recently as the fastest growing company in history. That ushers in plenty of competition. But, Travelzoo has a specified market and competition has not seemed to get in the way of its growth outlook.
There are 2 ways to look at TZOO, some may see the chart below and say that shares are on the way down and may not recover.
On the other hand, you may see the stochastic above and see a stock that is intensely oversold. Or the earnings trends below and think that this explosive growth is well worth the price here, seeing a good opportunity to buy on the dip.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service