Cash-Rich Stocks to Buy Now: Priceline.com (PCLN)
Priceline.com (PCLN) has been under pressure as of late, nearly $200 off its high of $1,378 — that’s a 15% correction in about a month.
That’s fine with me, though, because PCLN has about $6.75 billion in net cash and investments on its balance sheet, or about $129 per share. Backing that out of the current stock price, we’re looking at an effective price on PCLN stock of $1,048 per share. That’s more than 20 times expected current-year earnings — profits that are expected to grow 25% this year and 23% next year.
Nominal prices don’t actually matter, but it’s still funny to think of a four-digit stock being undervalued.
For now, I wouldn’t expect Priceline to do anything more with its cash hoard than grow it. That’s because while PCLN has grown its capex in the past few years, 2013′s total still was under $90 million — not surprising, considering Priceline is basically just a website — and free cash flow just keeps growing.
There are only 50 million shares of PCLN stock outstanding, so I think Priceline will either use that cash to eventually initiate a dividend, or to make an acquisition of a major competitor.