Analyzing Travelzoo (NASDAQ:TZOO) and TrueCar (NASDAQ:TRUE)

Travelzoo (NASDAQ:TZOO) and TrueCar (NASDAQ:TRUE) are both small-cap communication services companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, risk, dividends, earnings, analyst recommendations, institutional ownership and profitability.

Institutional and Insider Ownership

27.4% of Travelzoo shares are held by institutional investors. Comparatively, 79.4% of TrueCar shares are held by institutional investors. 45.3% of Travelzoo shares are held by insiders. Comparatively, 3.9% of TrueCar shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Profitability

This table compares Travelzoo and TrueCar’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Travelzoo	0.51%	-9.35%	1.00%
TrueCar	-10.27%	-23.76%	-18.02%

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Travelzoo and TrueCar, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Travelzoo	2	0	2	0	2.00
TrueCar	1	1	0	0	1.50

Travelzoo presently has a consensus price target of $13.83, suggesting a potential upside of 168.61%. Given Travelzoo’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Travelzoo is more favorable than TrueCar.

Risk & Volatility

Travelzoo has a beta of 1.36, suggesting that its share price is 36% more volatile than the S&P 500. Comparatively, TrueCar has a beta of 2.22, suggesting that its share price is 122% more volatile than the S&P 500.

Valuation & Earnings

This table compares Travelzoo and TrueCar”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Travelzoo	$91.72 million	0.57	$4.70 million	$0.03	171.67
TrueCar	$181.22 million	1.25	-$31.05 million	($0.22)	-11.55

Travelzoo has higher earnings, but lower revenue than TrueCar. TrueCar is trading at a lower price-to-earnings ratio than Travelzoo, indicating that it is currently the more affordable of the two stocks.

Summary

Travelzoo beats TrueCar on 10 of the 14 factors compared between the two stocks.

About Travelzoo

Travelzoo, together with its subsidiaries, operates as an Internet media company that provides travel, entertainment, and local experiences worldwide. It operates in four segments: Travelzoo North America, Travelzoo Europe, Jack's Flight Club, and New Initiatives. The company offers Travelzoo website, Travelzoo Top 20 email newsletters, Standalone email newsletters, Travelzoo Network, Travelzoo mobile applications, Jack's Flight Club website, Jack's Flight Club mobile applications, and Jack's Flight Club newsletters. The company's Travelzoo website and newsletters include local deals and getaways listings that allow members to purchase vouchers for offers from local businesses, such as spas, hotels, and restaurants; Jack's Flight Club, a subscription service that provides members with information about exceptional airfares; and Travelzoo Network, a network of third-party websites that list travel deals published by the company. It serves airlines, hotels, cruise lines, vacations packagers, tour operators, destinations, car rental companies, travel agents, theater and performing arts groups, restaurants, spas, and activity companies. Travelzoo Inc. was incorporated in 1998 and is headquartered in New York, New York.

About TrueCar

TrueCar, Inc. operates as an internet-based information, technology, and communication services company in the United States. It operates its platform on the TrueCar website and mobile applications. Its platform enables users to obtain market-based pricing data on new and used cars, and to connect with its network of TrueCar certified dealers. The company also offers forecast and consulting services regarding determination of the residual value of an automobile at given future points in time, which are used to underwrite automotive loans and leases, and by financial institutions to measure exposure and risk across loan, lease, and fleet portfolios. In addition, it provides TrueCar Trade, which gives consumers information on the value of their trade-in vehicles and enables them to obtain a guaranteed trade-in price before setting foot in the dealership; and DealerScience that provides dealers with advanced digital retailing software tools. The company was formerly known as Zag.com Inc. The company was incorporated in 2005 and is headquartered in Santa Monica, California.