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Travelzoo ( TZOO) has been trading in another stratosphere, climbing from $30 to $71 since April on ever-increasing volume. One of the key metrics we use when selecting stocks for our Stocks Under $10 service is the Alpha Factor. And since we launched in May, readers have frequently been asked why we need an Alpha Factor. This activity in Travelzoo offers a concrete example of the role Alpha Factor can have on stocks, and we wanted to take this opportunity to elucidate our approach to these Alpha stocks. Let's take a quick look at Travelzoo's business. The company is the largest Internet publisher of sales and specials directly from travel companies, and is driven by advertising sales. It partners with the big airlines, online travel sites, hotels, cruise and car lines to bring consumers together with the company that can best meet its travel needs, and forecasts call for the company to earn roughly $5.3 million this year on sales of about $30 million. Those numbers aren't spectacular, but they certainly aren't awful in a market in which the consumer is spending on travel and the Web is the most attractive place to shop for travel. Yet the market is treating this marginal travel player like it is the next Microsoft ( MSFT) or, dare we say, Taser ( TASR), valuing the stock at 255 times 2004 earnings estimates and 38 times sales. Yahoo! ( YHOO)), by contrast, a premier Internet player, is trading at 102 times earnings and only 18 times this year's sales estimates.