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Why Flight Centre Travel Group shares look like a winning bet

Long term shareholders in leading travel agent Flight Centre Travel Group Ltd (ASX: FLT) have certainly experienced incredible market beating returns.

Over the past five years the share price has doubled, whilst over the past decade, the share price has increased 271%.

In comparison, the gains from the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) have been just 11% and 3.5% over the same respective time frames.

Exceptional past performance

Here are a few highlights from Flight Centre’s journey over the past 20 years as an ASX listed company…

  • Compound average growth rate (CAGR) in total transaction value (TTV) of 16.5% per annum (pa)
  • TTV has exceeded the previous corresponding period 19 times
  • CAGR in profit before tax of 16.9% pa
  • $1.34 billion has been returned to shareholders in fully franked dividends

The past has obviously been spectacular but the future looks bright too

Flight Centre is now not just a major provider of retail travel services but it is also one of the world’s largest corporate travel managers.

The group has also expanded far beyond its domestic market with almost half of TTV and one-third of sales now generated in the Americas and Europe.

The group is rolling out a new instore experience of hyper and mega stores which Flight Centre has found are more productive, have higher morale and deliver a vastly improved customer experience.

Foolish Takeaway

For a company with such a superb operating history and with positive future growth prospects it would be reasonable to expect the stock to trade at a premium or at least in line with the market average.

Surprising at today’s share price the stock trades on a trailing price-to-earnings (PE) multiple of 16.7 times which represents a discount to the market.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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