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Webjet Limited: Profits up, but Flight Centre’s the better bet

Webjet Limited (ASX: WEB) recently announced it had strongly outperformed the travel market with revenues up 38%, net profit after tax up 17% to $5.9m and earnings per share up 23%. Webjet also raised its dividend by 20%.

Webjet also announced that this was the sixteenth consecutive half year of growth, which is very impressive. What was surprising was that the company then stated the following “Webjet has massively outperformed the general travel market in core operations of Australia and New Zealand by a factor of four times.” The company then went on to provide the table below.

Source: Webjet Presentation

What I take away from that table is that Webjet is comparing the growth of a travel consultant to growth experienced by airlines. Comparing apples with oranges anyone? That table is rather meaningless. For a start, the airlines mentioned in the table above aren’t the only airlines servicing international travel routes, and Qantas Airways Limited (ASX: QAN) has had its own well-publicised issues in the last six months.

Could I suggest a table comparing growth with your competitors?

Webjet’s Total Transaction Value (TTV) is miniscule compared to Flight Centre Limited’s (ASX: FLT) TTV. For the 2011 full year, Flight Centre’s TTV was $12.2Bn as opposed to Webjet’s $369m for the six months to December 2011.

Webjet is still a minnow in a very large pond. It’s always easier to grow from a small base, so Webjet’s double digit growth needs to be put in perspective. Flight Centre earns almost as much just in interest income as Webjet does in total revenues.

I can hardly wait to see Flight Centre’s half year results when they report later this month. Webjet’s results bode well for Flight Centre, and as I wrote way back in January, I believed Flight Centre was cheap back then. Flight Centre shares are now up more than 10% since January. Should Flight Centre report similar growth to Webjet, I expect Flight Centre shares to jump.

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 Motley Fool contributor Mike King owns shares in Flight Centre, but not Qantas or Webjet.  The Motley Fool ’s purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.  Click here  to be enlightened by The Motley Fool’s disclosure policy.

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