Why Tuniu's ROCE Surge and P/E Discount Make It a Buy Now

Tuniu (NASDAQ:TOUR), China's online travel agency, is sitting on a rare opportunity for investors: a stock trading at half the industry's valuation while quietly improving its capital efficiency. With a P/E ratio of just 12.96x versus the travel sector's 24.85x average, Tuniu is a value trap only if you ignore its recent operational turnaround and strategic moves. Let me break down why this is a buy now—before the market catches on.

ROCE: The Hidden Efficiency Play

ROCE measures how well a company uses its capital to generate profits—a critical metric for capital-intensive industries like travel. Tuniu's ROCE has been on a decade-long upward swing, climbing from a disastrous -64.22% in 2015 to a peak of 17.02% in 2021. Even its recent dip to -1.96% in Q1 2025 is far better than its historical lows and reflects short-term headwinds, not structural failure. Here's why this matters:

• Capital Reduction, Not Waste: Tuniu slashed capital employed from $139.5 million (Dec 2024) to $133.6 million (Mar 2025), proving it can grow without over-investing. Meanwhile, its ROCE, though temporarily negative, is still higher than 80% of its peers in efficiency-driven recovery.
• Profitability Shift: Despite a Q1 net loss, Tuniu's TTM net profit hit $77.2 million in 2024, its first full-year profit ever. This signals management's focus on trimming costs (e.g., AI-driven operations) and high-margin packaged tours, which rose 19% in Q1.

Valuation: A Discounted Gem

Tuniu trades at just half the industry's P/E multiple, even as it grows faster. Here's the math:

• Growth vs. Valuation: The travel sector's average P/E of 24.85x reflects optimism about post-pandemic recovery. Tuniu's 12.96x implies the market sees it as a laggard—wrongly. Its Q2 revenue guidance of 12-17% YoY growth (to $131–136.8 million) suggests it's outpacing peers like Carnival (P/E 21.71) and Hyatt (19.56).
• Margin of Safety: Even with risks—like its recent Nasdaq minimum bid price warning (fixed in June 2024)—Tuniu's cash reserves of $167 million and aggressive $10 million share buyback (already $9M spent) provide a cushion.

The Risk? Timing, Not Collapse

• Short-Term Pain, Long-Term Gain: Q1's net loss stemmed from a 86% surge in costs—likely due to one-time investments in offline stores and AI systems. These are strategic bets, not red flags. Once operational, they'll boost margins.
• Execution Risk: Tuniu's “New Select” premium travel packages and offline expansion into China's lower-tier cities are high-risk/high-reward. But with 80% of its revenue now from packaged tours (up from 60% in 2020), it's already winning.

Why Buy Now?

• Valuation Convergence: Tuniu's P/E is too far below its peers given its growth profile. When the market realizes this, the stock could double to match the sector average.
• ROCE Compounding: Even a modest ROCE rebound to 10% (from -1.96%) would supercharge profits. With capital under control, every percentage point of ROCE improvement adds $13 million annually to earnings.

Final Call: Buy the Dip

Tuniu is a value play with growth legs. At $0.80/share (down from $1.20 in early 2024), it's priced for failure—despite its first-ever annual profit and strong cash position. The risks are real, but the reward-to-risk ratio is unmatched. Buy now, and hold for when the market wakes up to Tuniu's ROCE-driven revival and valuation reset.

Action Item: Accumulate TOUR below $1.00. Set a price target of $2.00 once the P/E converges with the sector.