Expedia Group (EXPE): A Hidden Gem in the Travel Sector's Growth Surge

The travel industry is roaring back, and Expedia Group (EXPE) is primed to capitalize—yet its stock sits at a valuation that feels more like a sale rack than a luxury boutique. Let's dig into why this digital travel titan could be a steal for long-term investors, despite some headwinds.

Valuation: A Discounted Ticket to Growth

Expedia's current P/E ratio of 19.7 (as of July 2025) is strikingly undervalued compared to its peers. Consider these metrics:
- Trip.com Group (TCOM): P/E of 15.82 (but with slower growth expectations).
- Carnival Corp. (CCL): P/E of 21.71, reflecting cruise-line volatility.
- Live Nation (LYV): A P/E of 92.14, highlighting overvaluation in event-driven sectors.

Expedia's Price/Sales (P/S) ratio of 1.54 (forward) is also a bargain. The broader travel sector's average P/S hovers around 2.95, meaning Expedia trades at roughly half the industry's revenue multiple. Meanwhile, its PEG ratio—which factors in growth—hints at a compelling opportunity. Analysts project a 17.9% annual EPS growth rate through 2025, making its PEG ratio a steal.

ROE Superiority: Expedia's Profit Engine is Revving

Return on Equity (ROE) is the ultimate test of a company's efficiency. Expedia's ROE is 50.11% today, and analysts forecast it to surge to 136% by 2025. That's not a typo—it's a staggering outperformance of peers like PENN Entertainment (PENN) (ROE: 12.4%) or Hilton Grand Vacations (HGV) (ROE: 17.3%).

This ROE explosion isn't magic. Expedia's dominance in online travel bookings, coupled with its $2.38B free cash flow, positions it to capitalize on post-pandemic travel demand. Its 89.54% gross margin is a fortress, shielding profits even in volatile markets.

Growth at 69% (and Counting)

Yes, the past five years saw Expedia's earnings grow at a blistering 68.7% annually, double the travel industry's average. Analysts now project a 25.1% EPS growth over the next five years—a figure that could climb if leisure travel booms. With a $182 price target (3.2% above current levels), the Street isn't pricing in this upside yet.

Risk: Debt and Volatility

No rose garden exists without thorns. Expedia's Altman Z-Score of 1.03 flags elevated bankruptcy risk—a red flag. However, its Piotroski F-Score of 7/9 suggests manageable financial health, and its enterprise value of $22B is dwarfed by its $13.79B revenue.

Then there's the beta of 1.58: Expedia's stock swings harder than the market. A sudden dip in travel demand or rising interest rates could spook traders.

The Bottom Line: Buy the Dip, Hold the Vision

At $171/share, Expedia is a rare value play in a travel sector priced for perfection. Its valuation discounts are irrational given its $2B+ cash flow, superior ROE trajectory, and the $182 consensus target.

Action Plan:
- Buy now, but average in over time—dollar-cost averaging eases volatility pain.
- Hold for 3+ years: This isn't a trade; it's a bet on travel's renaissance.
- Watch for catalysts: Earnings beats (next on August 7), M&A activity, or a pickup in corporate bookings.

In a market obsessed with growth at any price, Expedia's blend of value and momentum is a rare combination. This isn't just a stock—it's a ticket to the next leg of travel's comeback.

Investing isn't about being right all the time—it's about being right when it counts. Expedia's time is now.