Since February 2025, Travel + Leisure has been in a holding pattern, posting a small return of 4.6% while floating around $60.12.
Is there a buying opportunity in Travel + Leisure, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Travel + Leisure Not Exciting?
We don't have much confidence in Travel + Leisure. Here are three reasons why you should be careful with TNL and a stock we'd rather own.
1. Weak Growth in Tours Conducted Points to Soft Demand
Revenue growth can be broken down into changes in price and volume (for companies like Travel + Leisure, our preferred volume metric is tours conducted). While both are important, the latter is the most critical to analyze because prices have a ceiling.
Travel + Leisure’s tours conducted came in at 197,000 in the latest quarter, and over the last two years, averaged 8.8% year-on-year growth. This performance was underwhelming and suggests it might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability. 
2. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Travel + Leisure’s ROIC has unfortunately decreased. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.
3. High Debt Levels Increase Risk
Debt is a tool that can boost company returns but presents risks if used irresponsibly. As long-term investors, we aim to avoid companies taking excessive advantage of this instrument because it could lead to insolvency.
Travel + Leisure’s $7.55 billion of debt exceeds the $212 million of cash on its balance sheet. Furthermore, its 8× net-debt-to-EBITDA ratio (based on its EBITDA of $947 million over the last 12 months) shows the company is overleveraged.
At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Travel + Leisure could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.
We hope Travel + Leisure can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.
Final Judgment
Travel + Leisure isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 9× forward P/E (or $60.12 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're fairly confident there are better investments elsewhere. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce.
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