Expedia Group Inc. (NASDAQ:EXPE)

The valuation multiples for Expedia Group Inc. exhibit a distinct shift in market pricing and fundamental performance between the 2017-2019 period and the 2020-2021 period. While early ratios suggest a relatively stable valuation based on earnings and sales, the later years indicate significant volatility and a marked increase in premiums relative to book value and operating profit.

Price to Earnings (P/E)

The P/E ratio fluctuated between 2017 and 2019, reaching a peak of 47.42 in 2018 before contracting to 30.43 in 2019. The absence of data for 2020 and 2021 suggests a period of negative net income, rendering the ratio inapplicable.

Price to Operating Profit (P/OP)

A downward trend was observed from 2018 to 2019, with the ratio falling to 19.04. However, by 2021, the ratio spiked dramatically to 160.88, signaling a substantial decline in operating profitability relative to the share price.

Price to Sales (P/S)

Between 2017 and 2019, the P/S ratio remained compressed, oscillating between 1.42 and 1.72. A sharp increase occurred in 2020, with the ratio rising to 4.05 and remaining elevated at 3.48 in 2021, reflecting a higher market valuation per dollar of revenue.

Price to Book Value (P/BV)

A consistent and accelerating upward trajectory is evident in the P/BV ratio. Starting at 3.49 in 2017, the multiple expanded to 8.32 in 2020 and further climbed to 14.55 by 2021, indicating that the market priced the equity at an increasingly high premium over its accounting book value.

The equity valuation of the company exhibits a divergence between share price appreciation and earnings performance over the five-year period ending December 31, 2021. While the share price demonstrated a consistent long-term increase, earnings experienced extreme volatility, which rendered the P/E ratio inapplicable in the final two years of the observed period.

Share Price Performance

A general upward trajectory is observed, with the share price rising from $104.00 in 2017 to $192.12 in 2021. Despite a marginal decline in 2019 to $122.80, the price experienced significant acceleration in 2020 and 2021.

Earnings per Share (EPS) Trends

Earnings grew consistently from 2017 to 2019, increasing from $2.49 to a peak of $4.04. This growth was followed by a severe contraction in 2020, with EPS falling to -$18.68. A recovery trend began in 2021, narrowing the loss to -$1.73, although the company remained unprofitable.

Price-to-Earnings (P/E) Ratio Analysis

The P/E ratio peaked at 47.42 in 2018 before compressing to 30.43 by the end of 2019. Due to the transition to negative earnings in 2020 and 2021, a P/E ratio could not be calculated for those years, reflecting a period where valuation was decoupled from current earnings.

The financial period between 2017 and 2021 is characterized by a significant divergence between share price appreciation and operating profit performance. While the share price exhibited a consistent overall upward trajectory, operating profitability experienced extreme volatility, resulting in a dramatic expansion of the valuation multiple by the end of the period.

Share Price Movement

A sustained growth trend is observed in the share price, rising from 104.00 in 2017 to 192.12 by 2021. Despite a minor contraction in 2019, the price climbed steadily, reflecting strong market valuation regardless of the underlying operational fluctuations.

Operating Profit per Share Performance

Operating profit per share showed steady growth from 2017 to 2019, peaking at 6.45. This trend was abruptly reversed in 2020, with profits collapsing to a loss of 18.90 per share. Although profitability returned to positive territory in 2021 at 1.19 per share, this figure remained significantly below pre-2020 levels.

Price to Operating Profit (P/OP) Ratio Analysis

The P/OP ratio remained relatively stable between 2017 and 2019, fluctuating between 19.04 and 26.96, which suggests a period of valuation alignment with earnings. The ratio became inapplicable in 2020 due to negative operating profits. In 2021, the ratio spiked to 160.88, indicating a severe disconnect where the share price increased substantially while the recovery of operating profits lagged significantly.

The overall trend indicates that by 2021, the market valuation had transitioned from a fundamentals-based multiple to one characterized by extreme expansion, as the share price reached its five-year high while operating profits had only partially recovered from a significant deficit.

An analysis of the valuation multiples from 2017 to 2021 reveals a significant shift in the Price to Sales (P/S) ratio, transitioning from a period of relative stability to a phase of elevated valuation. While the share price maintained a general upward trajectory over the five-year period, the underlying revenue per share experienced a severe disruption in 2020, which fundamentally altered the valuation multiple.

Price to Sales (P/S) Ratio Trends

The P/S ratio remained relatively stable between 2017 and 2019, fluctuating within a narrow range of 1.42 to 1.72. A sharp divergence occurred in 2020, when the ratio spiked to 4.05, indicating a substantial increase in the market valuation relative to generated sales. Although the ratio moderated slightly to 3.48 in 2021, it remained significantly higher than pre-2020 levels.

Sales per Share Performance

A trend of consistent growth in sales per share was observed from 2017 to 2019, rising from 66.26 to a peak of 86.20. This growth was followed by a precipitous decline in 2020, where sales per share dropped to 36.14, representing a contraction of approximately 58%. A partial recovery was evident by the end of 2021, with sales per share increasing to 55.20.

Share Price Correlation

The share price increased from 104.00 in 2017 to 192.12 in 2021. The disconnect between the share price and sales per share became most prominent in 2020 and 2021; during these years, the share price continued to rise despite the sharp decrease in sales per share. This divergence is the primary driver behind the expansion of the P/S ratio during the latter part of the period.

Between 2017 and 2021, a marked divergence emerged between the market valuation of the common stock and its underlying book value. The Price to Book Value (P/BV) ratio experienced a significant expansion, shifting from a relatively moderate multiple to a highly elevated level by the end of the period.

Share Price Performance

The share price exhibited a general upward trajectory, increasing from 104.00 US$ in 2017 to 192.12 US$ by 2021. While a slight contraction occurred in 2019, the overall period was characterized by substantial growth, with the most pronounced increase occurring between 2020 and 2021.

Book Value per Share (BVPS) Contraction

Conversely, the book value per share demonstrated a consistent downward trend. After remaining relatively stable between 2017 and 2019, the BVPS declined sharply from 28.34 US$ in 2019 to 13.21 US$ in 2021, representing a significant reduction in the net asset value attributable to each share.

P/BV Ratio Expansion

The P/BV ratio rose from 3.49 in 2017 to 14.55 in 2021. This exponential increase is the result of a compounding effect: the simultaneous rise in market price and the erosion of book value. The most aggressive expansion occurred after 2019, with the ratio nearly doubling between 2019 and 2020, and further increasing by approximately 75% in 2021.

The trajectory of these metrics indicates that the market valuation increasingly decoupled from the tangible accounting value over the five-year period. The sharp rise in the P/BV ratio suggests that investors placed an escalating premium on intangible assets, future growth expectations, or earnings potential rather than the recorded net asset base.