TRAVEL + LEISURE CO (NYSE:TNL) – An Undervalued Stock Worth Considering

TRAVEL + LEISURE CO (NYSE:TNL) was identified by our stock screener as a decent value stock, offering a combination of reasonable valuation, stable financial health, and steady profitability. The company operates in the hospitality and travel sector, with a focus on vacation ownership and travel services. Below, we examine why TNL stands out as an undervalued opportunity.

Valuation

TNL’s valuation metrics suggest the stock is attractively priced:

• P/E Ratio: At 8.44, TNL trades at a significant discount compared to both the industry average (26.52) and the S&P500 (26.52).
• Forward P/E: The forward P/E of 6.73 indicates further upside potential, with 94.74% of industry peers trading at higher multiples.
• Price/Free Cash Flow: The ratio is favorable, placing TNL cheaper than 97.74% of competitors.

These metrics suggest the stock is undervalued relative to its earnings potential.

Financial Health

TNL maintains a solid financial position:

• Liquidity: Strong current and quick ratios (3.88 and 2.85, respectively) indicate ample short-term financial flexibility, outperforming over 90% of industry peers.
• Debt Management: While the debt-to-FCF ratio is elevated at 12.63, the company has reduced its debt/assets ratio compared to last year.
• Altman-Z Score: A score of 2.29 suggests limited bankruptcy risk, in line with industry standards.

Profitability

The company’s profitability is stable:

• Margins: Operating margin (19.55%) and profit margin (10.76%) outperform over 75% of competitors.
• ROIC: At 10.49%, TNL generates returns above its cost of capital, though slightly below the industry average.

Growth Outlook

While past growth has been modest, future expectations are improving:

• Earnings Growth: EPS is projected to grow at 14.80% annually, signaling accelerating profitability.
• Revenue Growth: Expected to rise by 3.64% per year, a positive shift from recent declines.

Dividend Appeal

TNL offers an attractive 4.60% dividend yield, well above the industry (2.38%) and S&P500 averages. The payout ratio (34.69%) is sustainable, supported by earnings growth.

Our Decent Value Stocks screener lists more stocks with similar characteristics. For a deeper analysis, review the full fundamental report on TNL.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should conduct your own research before making investment decisions.