I started on this article about 3 months ago and set it aside twice. The reason was I had trouble understanding what was going on in both the income statement and balance sheet. Even the statement of cash flows was confusing. Unusual items included asset write-downs due to Argentine currency devaluation, semi-annual dividends, volatile tax rates, capitalizing website and software costs, a large related party liability, and large travel suppliers’ payables. If I was confused, I’m sure many others are too. This may partially explain the large disconnect between the valuation of Despegar and its peers. After talking to management, I feel a lot more comfortable understanding the true picture. I hope after reading this article, you will too.
Background
Despegar.com (NYSE:DESP) is the largest online travel company serving South and Central America and is based in Argentina. Its revenues are 52% from hotel bookings and vacation packages, 47% from airline, and 1% from financial…