Whenever this company’s name comes up in investing circles, you hear the same thing. Utter its name, and brace yourself for the inevitable but.
This is a simple exercise you can try at home or in the office. Just turn to the person next to you and say, “I’m thinking of buying Flight Centre shares.”
By my highly scientific, napkin-based calculation, you’ve got a 95% chance of hearing a response along the lines of, “Of course it’s a great company, I use the service myself, have done for years… but the Internet is going to kill it!”
The conventional wisdom is wrong
Sure, the Internet is going to kill Flight Centre (ASX: FLT). It’s been going to kill Flight Centre since at least 2006.
Since then, the travel agency company’s revenue has doubled. Its net income numbers look robustly healthy too, having increased from $79 million to $210 million.
Not to mention what the shares have done, including outperforming the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) by a handy 200% plus.
Click the chart for a larger view, if you’ve got the stomach for it.
It’s not always been smooth going for FLT shareholders, of course. But let’s hope those Internet fears kept the naysayers warm at night and made them rich, too, over this period, because it sure looks as though they missed out on a big win.
And the shares still look reasonably priced today
Past performance is no indication of future returns, right? Yet Flight Centre has exciting growth prospects today that seem likely to lead the company to a bigger and brighter future. Its expansion into China and the U.S. is particularly exciting, with a flagship New York store performing well, and plans for expansion to other U.S. cities in the works. The company also has plenty of cash for acquisitions.
Still, FLT shares trade today for less than 16 times earnings — or even less when you back out that considerable cash balance. This must be because the Internet is going to kill Flight Centre.
All jokes aside, sometimes the most difficult thing is to recognise the rare exception to the rule. Flight Centre, with its highly convenient service offerings and incredibly strong brand deeply set in some of the world’s most travel-mad markets, including Australia, the UK, South Africa, Singapore, and increasingly the U.S., seems to be just that. It’s a business with a strong brick-and-mortar base that the Internet hasn’t killed, and probably won’t kill in the future.
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