Reviewing Travelzoo (NASDAQ:TZOO) & Groupon (NASDAQ:GRPN)

Groupon (NASDAQ:GRPN) and Travelzoo (NASDAQ:TZOO) are both small-cap retail/wholesale companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, valuation, dividends, institutional ownership, risk, earnings and analyst recommendations.

Analyst Recommendations

This is a summary of current ratings for Groupon and Travelzoo, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Groupon	2	1	4	0	2.29
Travelzoo	0	2	3	0	2.60

Groupon presently has a consensus target price of $29.80, indicating a potential upside of 79.90%. Travelzoo has a consensus target price of $19.67, indicating a potential upside of 180.35%. Given Travelzoo’s stronger consensus rating and higher possible upside, analysts plainly believe Travelzoo is more favorable than Groupon.

Insider and Institutional Ownership

90.1% of Groupon shares are owned by institutional investors. Comparatively, 27.4% of Travelzoo shares are owned by institutional investors. 35.7% of Groupon shares are owned by insiders. Comparatively, 43.2% of Travelzoo shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Groupon and Travelzoo”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Groupon	$496.09 million	1.36	-$59.03 million	($3.49)	-4.75
Travelzoo	$89.92 million	0.85	$13.56 million	$0.64	10.96

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

Risk & Volatility

Groupon has a beta of 0.47, meaning that its stock price is 53% less volatile than the S&P 500. Comparatively, Travelzoo has a beta of 0.98, meaning that its stock price is 2% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Groupon	-1.89%	-19.61%	-1.45%
Travelzoo	8.66%	2,072.58%	15.50%

Summary

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

About Groupon

Groupon, Inc., together with its subsidiaries, operates a marketplace that connects consumers to merchants. It operates in two segments, North America and International. The company sells goods or services on behalf of third-party merchants. It serves customers through its mobile applications and websites. The company was formerly known as ThePoint.com, Inc. and changed its name to Groupon, Inc. in October 2008. Groupon, Inc. was incorporated in 2008 and is headquartered in Chicago, Illinois.

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.