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

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

Insider and Institutional Ownership

79.4% of TrueCar shares are owned by institutional investors. Comparatively, 27.4% of Travelzoo shares are owned by institutional investors. 3.9% of TrueCar shares are owned by insiders. Comparatively, 45.3% 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.

Analyst Recommendations

This is a breakdown of current ratings and target prices for TrueCar and Travelzoo, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
TrueCar	1	1	0	0	1.50
Travelzoo	1	1	2	0	2.25

Travelzoo has a consensus target price of $13.83, indicating a potential upside of 170.71%. Given Travelzoo’s stronger consensus rating and higher possible upside, analysts clearly believe Travelzoo is more favorable than TrueCar.

Profitability

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

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

Volatility & Risk

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

Earnings and Valuation

This table compares TrueCar and Travelzoo”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
TrueCar	$181.22 million	1.25	-$31.05 million	($0.22)	-11.55
Travelzoo	$91.72 million	0.57	$4.70 million	$0.03	170.33

Travelzoo has lower revenue, but higher earnings 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 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.

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.