Page 1092 - How to Make Money in Stocks Trilogy

78 HOW TO MAKE MONEY IN STOCKS—GETTING STARTED

Priceline’s annual earnings growth is over 9 times better than Expedia’s,
which gets a failing grade because it’s well below the 25% benchmark.

EPS Rating
Priceline.com Expedia
99 63

The highest-possible 99 EPS Rating shows Priceline is outperforming
99% of all stocks in terms of recent quarterly and annual earnings growth.
Expedia scores a mediocre 63, which is under the minimum 80 rating we
look for in the Buying Checklist.

SMR Rating
Priceline.com Expedia
A B

Return on Equity
Priceline.com Expedia
44% 10%

While Expedia’s SMR Rating of B earns a passing grade, Priceline’s score
is even better. That shows Priceline has superior performance in the 3 main
ingredients that drive EPS growth: Sales, Profit Margins and Return on
Equity. And Priceline’s ROE is over 4 times stronger than Expedia’s 10%,
which again fails to meet the 17% minimum.
Always keep in mind: Big earnings growth is the #1 factor to look for in a
stock. And at this point in time, Priceline’s growth was clearly outpacing that
of Expedia.

Does the Company Have a New, Innovative Product or Service?
Priceline’s innovative and exclusive “Name Your Own Price” system had
already been in place for years, but was still a major—and unique—draw for
consumers. They also had several “new” things driving growth, including
kitschy commercials featuring William Shatner.
To increase sales, Priceline had earlier dropped its booking fees.
Competitors—including Expedia—didn’t take similar action until 2 years
later.