There is little doubt that Australians love to travel and this trend doesn't look like changing anytime soon.
Recent statistics released by Tourism Australia showed that growth in the outbound tourism sector is expected to be around 3.3% each year until 2024. Business travel is expected to grow at an even faster rate than the leisure sector with growth of 5.8% expected over the coming two years.
Interestingly, Tourism Australia is also expecting the domestic market to grow solidly over the next few years as the depreciation of the dollar and lower fuel prices make domestic travel more attractive for Australian residents.
The report also highlighted the five factors considered the most essential to the performance of the Australian tourism industry in the years ahead. These included consumer confidence, discretionary income, exchange rates, airfares and air capacity.
Many of these factors are influenced by economic growth and with Australia's economy still moving along nicely, investors should expect the travel sector to remain fairly robust over the next few years.
Australian travel agents have already been major beneficiaries of the Australian consumers' increased desire to travel and with this trend likely to continue, these companies could continue to be great investments.
Australia's three largest listed travel companies are Flight Centre Travel Group Ltd (ASX: FLT), Corporate Travel Management Ltd (ASX: CTD) and Webjet Limited (ASX: WEB). Their five-year share price returns, as shown below, highlight their outperformance compared to the S&P/ASX 200 (Index: ^AXJO) (ASX:XJO) during that period.
Corporate Travel Management has been the clear standout in the sector but that doesn't mean the remaining two companies cannot deliver excellent shareholder returns in the future.
Here is a table that compares all three shares and some of their key fundamentals:
| Stock | Market Cap | Earnings Growth* | P/E Ratio** | Dividend Yield | PEG Ratio*** | FY17 forecast earnings growth | Discount to 52-week High | Debt to Equity Ratio | 5 Year TSR**** |
| Flight Centre | $4.31 billion | 5.4% | 16.2 | 3.7% | 2.29 | 7.7% | 7.8% | 2.6% | 18.6% |
| Corporate Travel | $1.26 billion | 68.0% | 35.9 | 1.5% | 1.33 | 22.9% | 4.8% | 0.0% | 52.6% |
| Webjet | $0.51 billion | 14.8% | 24.2 | 2.2% | 1.44 | 38.3% | 0.0% | 30.9% | 31.4% |
* Latest underlying earnings growth for the first half of FY16
** Current price-to-earnings ratio according to CommSec
***Price/earnings (P/E) ratio divided by the growth rate as calculated by CommSec
****Total Shareholder Return = Dividends + Capital Gains
From the table above, it appears all three shares are trading at fair valuations without one company standing out as a screaming buy.
Although some investors could argue Flight Centre is the cheapest based on the current P/E ratio, it is also the most expensive when using its PEG ratio.
Earnings growth is ultimately what drives the valuation of a company and because Flight Centre is unlikely to deliver double digit earnings growth over the next two years, the market has rightly valued the company below that of Webjet and Corporate Travel.
Foolish takeaway
Despite a positive growth outlook for Australia's travel sector, the ASX's three major travel companies look fairly valued at the moment.
As a result, investors probably should not rush out to buy these stocks just yet, but instead wait for a share price that creates a more attractive buying opportunity.
