BKNG Stock – Booking Holdings Stock Appears – GuruFocus.com
The stock of Booking Holdings (NAS:BKNG, 30-year Financials) is estimated to be significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus’ estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $2279.35 per share and the market cap of $93.6 billion, Booking Holdings stock shows every sign of being significantly overvalued. GF Value for Booking Holdings is shown in the chart below.
Because Booking Holdings is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which is estimated to grow 1.51% annually over the next three to five years.
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Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company’s financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company’s financial strength. Booking Holdings has a cash-to-debt ratio of 0.89, which ranks in the middle range of the companies in Travel & Leisure industry. Based on this, GuruFocus ranks Booking Holdings’s financial strength as 5 out of 10, suggesting fair balance sheet. This is the debt and cash of Booking Holdings over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Booking Holdings has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $6.8 billion and earnings of $1.43 a share. Its operating margin is 8.53%, which ranks better than 77% of the companies in Travel & Leisure industry. Overall, the profitability of Booking Holdings is ranked 8 out of 10, which indicates strong profitability. This is the revenue and net income of Booking Holdings over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Booking Holdings is -13.4%, which ranks in the middle range of the companies in Travel & Leisure industry. The 3-year average EBITDA growth rate is -27.7%, which ranks worse than 83% of the companies in Travel & Leisure industry.
Another way to evaluate a company’s profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Booking Holdings’s ROIC was 0.52, while its WACC came in at 8.95. The historical ROIC vs WACC comparison of Booking Holdings is shown below:
Overall, the stock of Booking Holdings (NAS:BKNG, 30-year Financials) appears to be significantly overvalued. The company’s financial condition is fair and its profitability is strong. Its growth ranks worse than 83% of the companies in Travel & Leisure industry. To learn more about Booking Holdings stock, you can check out its 30-year Financials here.
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