Summary: OVERPRICED
Score: 0/20
MOS: 1%
Share Price: $3
Sticker Price: $3
Is Trivago stock a good buy?
Trivago is a Dutch transnational company specializing in internet-related services and products in the hotel, lodging, and metasearch fields. They were founded in 2005 and are headquartered in Amsterdam, Netherlands.
Here are some interesting facts about the company.
- In 2005, the founding team created Germany’s first hotel search engine.
- In 2012, Expedia acquired a stake in Trivago for $632M.
- In 2014, Trivago acquired the mobile app development company Rheinfabrik.
- In 2015, Trivago reported $500M in revenue.
- In 2016, Trivago announced it had acquired a portion of Cloud-PMS company Base7booking.
- In 2016, Trivago reached 1,000 employees.
- In 2016, Trivago went public.
Trivago generates revenue through advertising. Booking platforms, hoteliers, and other providers list rates and advertise on the Trivago website. Unfortunately, 2020 was a brutal year for Trivago as sales fell by 70%.
Here is what the news has to say.
This article from The Motley Fool says a strong travel recovery is ahead. Trivago’s biggest market is in Europe which is starting to lift travel restrictions. This article also states that clicks for Israel travel is above 2019 levels and in the US it’s near 2019 levels. This is a great sign for the company.
This article from Yahoo Finance states that Trivago launched a new product called Trivago Weekend which will allow people to discover getaways close to home. This is capitalizing on the fact that a lot of people simply want to get out of their homes after being quarantined for over a year.
Now let’s take a look at the 4 M’s.
MOS (Margin of Safety): With a score of 0/20 and a MOS of 1%, this shows the financials are in rough shape. Falling below 10/20 is a red flag but to reach 0/20 is a bad sign. We know Covid-19 was a major contributor but the question is, can they climb out? I’m sure some financial improvements will occur over the coming year due to travel restrictions being lifted but they have a long way to go.
Meaning: Travel will continue over the coming decades so we know websites that make traveling easier, will be in demand. The meaning isn’t the problem, as this is a relatively easy business to understand. The problem is the moat.
Moat: Creating a travel site is relatively easy. Unfortunately, there are a lot of competitors. Expedia is a major shareholder in Trivago but Expedia also owns Travelocity, Orbitz, Hotels.com, and Hotwire. All are very similar platforms. Another big player in the market is Booking Holdings which owns Booking.com, Priceline.com, Agoda.com, Kayak.com, Cheapflights, Rentalcars.com Momondo, and OpenTable. Also, don’t forget about Airbnb which is continuing to see an increase in market share.
Management: Here is an interesting management story to pay attention to. The company was founded by Rolf Schrömgens, Peter Vinnemeier, Stephan Stubner, and Malte Siewert. All four no longer lead the company. In some cases, young tech founders are good at creating and innovating but they are not good at leading and scaling. In these circumstances, a board of directors will ask the founders to step aside so they can bring in a seasoned veteran with experience leading and scaling revenue for large organizations. Based on my homework, it appears a few of the founders joined the board of directors while others stepped away from the company to pursue other goals. Axel Hefer was appointed managing director of Trivago in 2016. Prior to Trivago, he served as CFO and COO of Home24 AG, an online home furniture and decor company. He was also managing director of One Equity Partners, a Private Equity Division of JPMorgan Chase. At this given moment, Hefer has his work cut out.
Here is a look at the financials.
Currency in EUR.
Revenue (Found on the Income Statement)
2017: €1B
2018: €914M
2019: €838M
2020: €248M
Revenues declined significantly in 2020 due to Covid-19.
Net Income (Found on the Income Statement)
2017: -€12M
2018: -€21M
2019: €17M
2020: -€245M
Net Income declined significantly in 2020 as well.
EPS (Found on the Income Statement)
2017: -.05
2018: -.06
2019: .05
2020: -.69
EPS has crashed. This is the cause of the low MOS.
Free Cash Flow (Found on the Cash Flow Statement)
2017: -€25M
2018: -€29M
2019: €66M
2020: €2M
Free Cash Flow in 2019 saw a nice increase.
Total Assets (Found on the Balance Sheet)
2017: €1B
2018: €1B
2019: €1.1B
2020: €830M
Total Assets are decreasing which is not a good sign.
Total Liabilities (Found on the Balance Sheet)
2017: €224M
2018: €241M
2019: €213M
2020: €166M
Total Liabilities have decreased which is a good sign.
Total Debt (Found on the Balance Sheet)
2017: €0
2018: €127M
2019: €0
2020: €93M
Total Debt has increased which is a bad sign.
Total Equity (Found on the Balance Sheet)
2017: €853M
2018: €853M
2019: €894M
2020: €664M
Total Equity has decreased which is a bad sign.
With a Score of 0/20 and a MOS of 1%, Trivago is in a bad spot. As the travel industry continues to open up, their revenues will increase but the issue to pay attention to most is the moat. There are two many competitors with a very similar business model. Increasing market share will be difficult.
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