Travel + Leisure Co (NYSE:TNL) Emerges as a Strong Value Pick with Solid Fundamentals and Growth Potential

Travel + Leisure Co (NYSE:TNL) stands out as a possible choice for value investors after being highlighted by a "Decent Value" screening method. This strategy looks for stocks with good valuation metrics (scoring 7 or above on ChartMill's fundamental rating system) while also having fair scores in profitability, financial strength, and growth. The approach follows classic value investing ideas, targeting companies trading below their true worth but with strong fundamentals, providing a safety net alongside steady business results.

Main Advantages of TNL Based on Fundamental Analysis

1. Favorable Valuation Metrics

TNL earns a 7 out of 10 in valuation, showing the stock is priced modestly compared to its fundamentals. Key points include:

• A P/E ratio of 10.44, much lower than the industry average (35.49) and the S&P 500 (28.04).
• A forward P/E of 8.74, hinting that expected earnings growth is not yet reflected in the price.
• An Enterprise Value/EBITDA ratio that is more attractive than 62.6% of industry peers.
• A Price/Free Cash Flow ratio better than 95.4% of competitors, supporting its undervalued status.

For value investors, these figures imply TNL is priced below its actual value, offering a possible opportunity if the market adjusts over time.

2. Stable Financial Position

With a health rating of 6, TNL shows balance sheet strength:

• A solid Current Ratio of 3.88 and Quick Ratio of 2.85, showing enough liquidity to meet short-term needs. These ratios beat 96.2% and 94.7% of industry peers.
• A falling debt-to-assets ratio, pointing to better debt management.
• An Altman-Z score of 2.36, placing it in a steady (though not risk-free) position compared to 60.3% of competitors.

While the debt-to-FCF ratio (12.63) is high, it matches industry standards, meaning TNL is not unusual in its use of debt. For value investors, financial stability is vital to ensure the company can handle economic challenges while continuing operations.

3. Steady Profitability

TNL receives a profitability score of 5, backed by:

• A Return on Assets (6.18%) and Return on Invested Capital (10.49%) that exceed 75.6% and 74.8% of peers.
• A Profit Margin of 10.76% and Operating Margin of 19.55%, both in the top quarter of the industry.
• Consistent positive earnings and cash flow over the last five years.

Though margins have dipped slightly, the company remains profitable—a key factor for value investors who focus on reliable earnings over speculative growth.

4. Growth Prospects and Dividend Benefits

Despite a modest growth rating of 4, TNL displays encouraging forward-looking signs:

• Expected EPS growth of 14.22% per year, pointing to rising profitability.
• A dividend yield of 3.63%, higher than the S&P 500 average (2.35%) and competitive in its sector.
• A 10-year dividend payment history with a manageable payout ratio of 34.69%, making it attractive to income-focused value investors.

While past revenue growth has been slow (-0.9% yearly), the projected 3.64% annual revenue growth and improving EPS trend suggest possible upward momentum.

Why This Is Important for Value Investors

Value investing relies on finding stocks priced below their true value while avoiding "value traps"—companies that seem cheap but are in decline. TNL’s mix of low valuation multiples, strong liquidity, steady profitability, and a dependable dividend fits this strategy. The stock’s discount compared to peers and broader markets indicates potential for growth if fundamentals remain strong or improve.

For a closer look at TNL’s financials, see the full fundamental analysis report here.

Find Other Undervalued Stocks

Want to explore more stocks that match this "Decent Value" profile? Visit the predefined screen on ChartMill for additional options that meet similar criteria.

Disclaimer: This article is not investment advice. Always do your own research or consult a financial advisor before making investment decisions.