Why Travelzoo Shares Took Flight

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of online travel and entertainment deal company Travelzoo took flight, advancing as much as 27%, after surpassing Wall Street's estimates in the fourth quarter.

So what: For the quarter, Travelzoo reported that revenue increased a modest 5% to $37 million. However, net income slipped 42% to just $0.24 from the year-ago period. More interesting was that North American revenue rose just 3% while European revenue jumped double-digits, 10%. Wall Street's forecast had been calling for Travelzoo to earn only $0.22 on revenue of $35.5 million.

Now what: Up as much as 27% for a 42% decline in net income? I know Travelzoo tends to be a very volatile stock, but sometimes the moves here are breathtaking and without reason. Travelzoo has smartly expanded its sales force and pushed its business overseas -- albeit to Europe, the toughest market for growth on the planet right now -- but it's going to deal with the high expenses and fluctuations associated with adding and training new people, as well as entering new geographic regions. At a valuation of nearly 20 times forward earnings and with subscriber growth for the year of just 5%, I'm not particularly impressed and will personally be passing on Travelzoo at these lofty levels.

Craving more input? Start by adding Travelzoo to your free and personalized Watchlist so you can keep up on the latest news with the company.

Another company ready to take flight
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

The article Why Travelzoo Shares Took Flight originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.