Over the last six months, Booking’s shares have sunk to $191.83, producing a disappointing 6.7% loss - a stark contrast to the S&P 500’s 5.8% gain. This might have investors contemplating their next move.
Following the pullback, is this a buying opportunity for BKNG? Find out in our full research report, it’s free.
Why Does Booking Spark Debate?
Formerly known as The Priceline Group, Booking Holdings (NASDAQ: BKNG) is the world’s largest online travel agency.
Two Things to Like:
1. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Booking’s EPS grew at 31.4% compounded annual growth rate over the last three years, higher than its 16.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Booking has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the consumer internet sector, averaging an eye-popping 33.5% over the last two years.
One Reason to be Careful:
Growth in Customer Spending Lags Peers
Average revenue per booking (ARPB) is a critical metric to track because it not only measures how much users book on its platform but also the commission that Booking can charge.
Booking’s ARPB growth has been mediocre over the last two years, averaging 3.6%. This isn’t great, but the increase in room nights booked is more relevant for assessing long-term business potential. We’ll monitor the situation closely; if Booking tries boosting ARPB by taking a more aggressive approach to monetization, it’s unclear whether bookings can continue growing at the current pace. 
Final Judgment
Booking has huge potential even though it has some open questions. After the recent drawdown, the stock trades at 13.5× forward EV/EBITDA (or $191.83 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.
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