As reflected at the current price of $133, what future Expedia Group operating performance is the market anticipating? To achieve average annual stock market performance of 9.0% over the next 6 years, Expedia Group shares will need to reach $223. To achieve Upper quartile performance, Expedia Group’s stock price will need to reach $263 by 2029.
Executive Summary
- Key Expedia Group characteristics: very high profitability, high financial strength, instability, and below average expected growth. A big positive influence on Expedia Group’s valuation is its superior Growth.
- Very high valuation, above market shareholder returns. Current valuation levels are very high relative to the Expedia Group Peer Group. Recent market returns have outperformed the Expedia Group Peer Group. Total shareholder returns expected to significantly lag the overall equity market. Based on current investor expectations, Expedia Group shares should reach a level of $120 by 2029 — an -1.7% per year total shareholder return. A 2029 stock price of $223 would reflect median performance and a price of $263 would be required to reach upper quartile performance.
- Growth has been Expedia Group’s biggest valuation strength. Historical growth has been very high relative to the Expedia Group Peer Group and forecasted growth is relatively below average. EPS Growth, Revenue Growth, and Asset Growth have been superior. These factors have buoyed market perceptions of Expedia Group. Expedia Group’s historical income statement growth has been higher than growth in the balance sheet. Revenue growth has exceeded asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. Expedia Group’s consensus growth expectations are lower than historical growth.
- Return on Equity, and Asset Turnover are group leading. These factors have strengthened market perceptions of Expedia Group. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
- Expedia Group’s risk profile is neutral. Overall variability has been above average with above average revenue variability, relatively low E.P.S. variability, and very high stock price volatility. Financial Strength is relatively high and earnings’ expectations are relatively very high. The debt/capital ratio has been relatively steady.
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