TNL

We rate Travel & Leisure Co. (TNL) as a Hold with a composite score of 61.5/100 at a current price of $74.97. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in momentum (79th percentile) and value (74th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (43/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: quarterly earnings execution and sector-level competitive dynamics. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Travel & Leisure Co. holds a mid-tier position (#30 of 50) within the Retail Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 61.5/100 places it at rank #555 in our full 7,333-stock universe. At $3.9B in market capitalization, Travel & Leisure Co. is a mid-cap player in the Retail Trade space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 6% and favorable momentum (79th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 98% (+61.7pp vs sector) narrow to operating margins of 19% (+15.2pp vs sector) and net margins of 9.7%, yielding a gross-to-net conversion rate of 10%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $74.97, Travel & Leisure Co. appears undervalued relative to its fundamentals. Our value factor score of 74/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 12.6x (a 41% discount to the sector median of 21.4x), EV/EBITDA of 11.8x (at a premium), P/S of 1.2x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to Travel & Leisure Co.. The stock presents a balanced risk profile: elevated market sensitivity (beta of 1.34). While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.34). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 65th percentile and quality factor at the 47th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 98% provide a buffer against cost pressures; above-average stability (65th percentile) suggests predictable business dynamics; a 3.66% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Travel & Leisure Co.'s capital allocation as Poor. Key concerns include low returns on equity (-63.2%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Travel & Leisure Co. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Travel & Leisure Co. receives a Hold rating with a composite score of 61.5/100 (rank #555 of 7,333). Our quantitative framework assigns a Narrow Moat (43/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 62/100.

Our analysis supports a neutral stance on Travel & Leisure Co.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.