EXPE – Market expectations are for declining Adjusted ROA, and management’s concerns about signings growth and their European footprint imply this may be warranted

• Expedia, Inc. (EXPE) currently trades near historical averages relative to Adjusted Earnings, with a 14.1x Adjusted P/E. However, even at these levels, markets are pricing in fairly bearish expectations for the firm, which may be warranted considering management’s concerns about signings growth and their European footprint
• Specifically, management appears concerned about the sustainability of new customer signings growth, and may lack confidence in their ability to significantly expand their footprint in Europe. Should Adjusted ROA fade below historically low levels, as management sentiment indicates, equity would be fairly valued