“Priceline.com, Inc. (PCLN) is a leader in global online hotel reservations with over 270,000 participating hotels worldwide. Priceline’s business is not capital intensive and thus generates strong free cash flows, which have steadily and rapidly grown from $140 million in 2007 to $1.3 billion in 2011. The company ended the September 30, 2012, quarter with more than $4.7 billion in cash on the balance sheet.
“Priceline generates high returns on shareholders’ equity, which topped 41% in 2011. This demonstrates the superior profitability of the company’s business model. Profit margins have more than doubled over the last five years from 10% to 24%, with further profit margin expansion expected in 2012. Due to expanding profit margins, Priceline’s net income has compounded at a jet-setting 66% annual rate over the last five years with sales growing at a 33% annual rate.
“Despite a weak global economy, Priceline has benefited from a strong leisure travel environment, expanding hotel availability, a continued shift to the Internet by people making travel reservations and geographic expansion. Long-term investors should book a reservation with Priceline, a HI- quality company with strong brands, strong cash flows and strong growth.”
- Ingrid R. Hendershot, Hendershot Investments, January 2013
