Trip.com Group (TCOM)

By both methods, the value today (DCF $110 · Multiples $98) exceeds the market price ($41).

Today — with margin of safety: at $41 trades ~58.7% below its value discounted to today (~$98) — the wide discount we require (≥38%, equivalent to a ~15% annual return); the risk is covered by the margin, not the rate.

At 5 years — Muy infravalorado: the target price ($123) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years comfortably exceeds the risk-free rate (4.5%) — and the discount reaches the required margin of safety.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($41) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-18.5%/year) than we project (6.8%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~CNY 5 bn of owner earnings in year 5 (vs ~CNY 19.2 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). Cash accumulates the retained surplus —what is not returned as dividend or buyback—, so that EV falls and multiples compress going forward. The valuation is done on EV/EBIT. In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Currency: Trip.com reports in renminbi (RMB) and trades in dollars on Nasdaq (1 ADS = 1 ordinary share). The entire model runs in RMB; the anchor market value was crossed at the convenience translation rate the 2Q2026 release itself uses as of Jun-30-2026 (US$1.00 = RMB6.785), and the record converts once, at the end, at the live exchange rate. Year-0 = twelve months as of Jun-30-2026 built by levels: FY2025 from the 20-F plus first-half 2026 minus first-half 2025 from the 6-K dated Sep-16-2026. Revenue RMB65,708 million (62,510 + 31,871 − 28,673). Operating income is normalized by excluding the SAMR antitrust penalty of RMB5,180 million (disgorgement of illegal gains of RMB1,658 million plus a fine of RMB3,521 million, 7.5% of 2025 PRC revenue, per the administrative decision dated Jul-25-2026) recorded in general expenses in 2Q2026, which is non-recurring: reported RMB10,591 million becomes RMB15,771 million (24.0% margin). The 2Q2026 release states that accommodation revenue was partly offset by a revenue offset imposed by SAMR but does not quantify it or say whether it recurs; what is recurring is the obligation — ordered by the decision — to cease the sanctioned conduct (exclusivity and unreasonable conditions) and to refund RMB122 million in discounted security deposits to hotels, whose effect on future commission is not disclosed. The release does not include a cash flow statement, so year-0 operating cash flow, capex, and free cash flow remain at FY2025 levels (RMB14,379, 797, and 13,582 million). Path: the 20-F does not provide annual guidance and the 2Q2026 release also does not publish numeric guidance, so year 1 does not start at the +11.2% for the half-year but at the 2Q2026 rate (+5.5% year-over-year, −3% versus 1Q on energy cost, geopolitical volatility, and operational adjustments): base case +6.0%, adverse +3.0%, favorable +8.0%. The shape is a dip and mild recovery (+6.0%, +6.5%, and +7.0% from year 3), declared under the rebound exception: the dip reflects macro factors the issuer itself describes as transitory, and the 7% terminal rate stays within the band for a quality business still growing, without returning to the 17-20% path of 2024-2025. Operating margin: starts from the 24.0% normalized figure and the 2Q2026 adjusted EBITDA margin deterioration (29% versus 33% a year earlier), 23.5% in years 1 and 2 and 24.0% by year 5; the adverse case assumes the remedy compresses margin to 21%. Maintenance capex = 50% of capex (method convention). Buybacks: the share count path is a single one across the three scenarios and reduces the count 1.5% per year, between the net reduction in FY2025 (653.3 to 649.6 million, −0.6%) and the drop in the 2Q basic average (659.9 million in 2Q2025 versus 632.3 million in 2Q2026, −4.2%), below the capacity given by free cash flow after the dividend. Year-0 count: 629.7 million, the point-in-time count as of Mar-31-2026 that the 20-F itself publishes in Item 6.E (629,705222,222 ordinary shares issued and outstanding as of March 31, 2026), the closest to the Jun-30-2026 ttmEnd — the 2Q2026 release only publishes weighted averages (632.3 million), and the 2025 year-end figure (649.6 million) is older; the convertible notes are subtracted as debt and not added to the denominator. Balance as of Jun-30-2026 from the release: cash, equivalents, and restricted cash RMB56,016 million plus short-term investments 23,499 (restricted cash is not published separately in the release; as of Dec-31-2025 it was RMB6.6 billion), against debt of RMB26,397 million plus RMB5,179 million of the SAMR penalty accrued and unpaid at half-year close (the decision is dated Jul-25-2026, after the close, so as of Jun-30-2026 it could not have been paid; other current liabilities rose RMB4,251 million during the half). With the penalty loaded as debt-type liability, the model's total debt is RMB31,576 million and net cash is RMB47,939 million. The long-term investment portfolio (RMB51,361 million) is left out of the cascade and shown as an optionality.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $123 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $41, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $123 in 5 years and a required return of 4.5% annually, the maximum to pay today is $98. Against the current market price ($41), the margin of safety is 58.7% (trades below the maximum → there is margin) and the total return at that price would be 24.7% annually.

• Entry multiple. 8× operating income excluding the fine, with net cash, below the floor of its exit band.
• Estimated return. +25% annually over five years in the base case (Very undervalued).
• Assets outside the valuation. A long-term investment portfolio of RMB51.4 billion that is not paid for.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (103%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Operating margin. 25-27% in 2023-2025 and 24.0% excluding the fine in the twelve months to Jun 30, 2026.
• Return on capital. 12.7% on total invested capital, above the 10% bar; higher on operating capital excluding the investment portfolio.
• Cash conversion. 2025 operating cash flow (RMB14.4 billion) came in below operating income due to working-capital consumption; the Q2 2026 release does not include a cash flow statement.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

In a travel agency, revenue is booked volume times commission rate. The 20-F reports booked-volume growth by line (accommodation +17%, transportation +6% in 2025) but not the commission rate; the gap between revenue growth and volume growth in both lines (21% versus 17% and 11% versus 6%) indicates higher monetization per booked unit in 2025. From Q2 2026 that monetization in accommodation is affected by the contra-revenue imposed by the SAMR. Amounts are in RMB.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Revenue trajectory. +19.8% in 2024, +17.1% in 2025 and +11.2% in the first half of 2026.
• Monetization per booked unit. Revenue grew faster than booked volume in accommodation and transportation in 2025; from Q2 2026 the SAMR contra-revenue weighs on accommodation.
• 2026 trend. From +17% in Q1 2026 to +6% in Q2 2026, with a 3% sequential decline and no numerical guidance.

• Capital-light agency model. Charges a commission without owning inventory; capex of RMB0.8 billion on RMB62.5 billion of revenue in 2025.
• Network effect. Broad supply that attracts users and users that attract suppliers, across four brands.
• Demand recurrence. Travel is recurring, but sensitive to energy costs and geopolitical volatility, as Q2 2026 shows.
• Regulatory exposure in China. VIE structure, SAMR fine and contra-revenue on accommodation.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $47.9 bn
• ✓Interest coverage (EBIT / interest)29.8x
• !Liquidity (current ratio)1.33×
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 103% of ROIC
• !Value creation (ROIC − 10% bar)+3pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 1.0x — no over-investment
• –Float / working capitalNeutral WC
• !Dilution (SBC % of revenue + shares)SBC 3.9% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Net cash. RMB47.9 billion of net cash as of Jun 30, 2026, with restricted cash included and net of the SAMR sanction accrued and unpaid (RMB5,179 million).
• Debt profile. RMB25.8 billion of debt is due in the short term; covered by cash.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Leadership continuity. Co-founder as executive chairman and CEO since 2016.
• Capital-return policy. Buyback of RMB4.4 billion and dividend of RMB1.4 billion in 2025; the Q2 2026 basic share count fell 4.2% year over year.
• Deleveraging. Debt fell from RMB39.6 billion (2024) to RMB26.4 billion as of Jun 30, 2026.
• Dilution from stock-based compensation. RMB2.6 billion in the twelve months to Jun 30, 2026, 3.9% of revenue; expensed in the metric.

• Motivated sellers around a named regulatory event: the SAMR investigation opened in January 2026 ended in a decision received on Jul 25, 2026 (a RMB1,658 million confiscation plus a RMB3,521 million fine, RMB5,180 million in total, non-recurring) recorded in Q2 2026, and in a contra-revenue on accommodation that the release does not quantify; excluding the sanction, the Q2 2026 operating margin was 23.7%, without the permanent deterioration the price appears to be discounting.
• A slowdown verified in the Q2 2026 release: revenue +6% year over year and −3% versus Q1, with the adjusted EBITDA margin at 29% versus 33% a year earlier, with no numerical guidance for the rest of the year.
• A misleading earnings comparison: 2025's includes RMB15.4 billion in gains from business acquisitions and the sale of long-term investments (RMB15.2 billion from MakeMyTrip) and Q2 2026's includes a loss from the sanction, so reported earnings overstate the deterioration of the operating business.
• A jurisdiction discount: the VIE structure, broad PRC government oversight and the risk of a U.S. delisting keep away investors who cannot or will not hold Chinese issuers.

The stock's decline has an identifiable cause in the filings: the SAMR sanction (a RMB5,180 million fine and a contra-revenue on accommodation) and the Q2 2026 slowdown reported in the Sep 16, 2026 release. At $41 the price implies 8× operating income excluding the fine, well below the 15x floor of its band, as if the network effect had stopped producing margin; Q2 2026 still shows revenue +6% and an operating margin excluding the fine of 23.7%.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +14%/year (+96% total): the margin of safety protects the downside. The bull (+31%/year, +284% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• SAMR antitrust remedy. A RMB5,180 million penalty (confiscation plus fine, non-recurring) by decision dated Jul 25, 2026, with an order to return RMB122 million and discontinue the exclusivity agreements; the Q2 2026 contra-revenue on accommodation is not quantified.
• US delisting. Risk under the HFCAA if the PCAOB cannot inspect the auditor.
• Dependence on the VIE structure. The core China business operates through contractual arrangements.
• Currency. Value is generated in RMB and the price is paid in dollars.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 13% above the 10% bar, with a +59% margin → a quality business at a good price.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 7% at a multiple/growth of 1.2 → cheap for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 13% (EBIT/EV) + ROIC 13% → brushes the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -19% vs our 7%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor +14%/yr, bull-scenario ceiling +31%/yr over 5y and a +59% margin → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: network effects, intangibles, efficient scale, cost advantage, switching costs → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -19%, within what we project (7%) — the story squares with the numbers.