Is Flight Centre a buy?

Flight Centre (ASX: FLT) has seen some phenomenal success in recent years, with the share price rise flying the flag for the travel industry. Through its retail and corporate brands, the company provides flights, hotels, insurance, holiday packages, and multiple other travel services.

It now has over 2,500 stores and operates in 11 countries worldwide — Australia, New Zealand, Canada, United States, United Kingdom, South Africa, China, Hong Kong, India, Singapore and the UAE.  Structural growth through store openings and global expansion remains a key objective. Outside Australia, the UK is the company’s main profit driver, with New Zealand and Singapore seeing the strongest regional growth. The company has also grown its presence in the corporate travel sector, doubling turnover in the past three years alone.

Shareholders liked the interim dividend’s 12.2% rise on the previous year. In effect, over half of the period’s net profit after tax (NPAT) was returned to investors. This is in line with the company’s stated policy of returning 50%-60% of NPAT to investors. For FY 2012/13, the business expects to be at the top end of its targeted profit before tax range of $300-315 million.

Some thought the shift online would spell trouble, however, the group’s blended business model has proved a success. It allows customers to interact with the business how they want – online, or offline through its consultants. The successful online/offline coupling will remain key to sales and profit growth.

Also taking advantage of growing global travel demand, smaller competitors like Corporate Travel Management (ASX: CTD) have mirrored the Flight Centre’s success. Jetset Travelworld (ASX: JET) is another competitor worth a look.

Foolish takeaway

Flight Centre’s rise has been a remarkable one. A market darling, its share price now appears fully valued, recently trading on a P/E ratio over 17. It remains a growth story though, and the opportunity to get on board may still be attractive.

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Motley Fool contributor Tom Richardson owns shares in Corporate Travel Management.

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