The Motley Fool

3 reasons why Flight Centre Travel Group is a standout stock

Travel agent Flight Centre Travel Group (ASX: FLT) has seen its share price slip by around 10% since hitting an all-time high of $55.72.

Some investors may look at the current share price of just over $50 and judge it expensive, without looking much further. Others may wonder how a bricks-and-mortar travel agent has managed to continue competing against purely online travel booking companies, such as Webjet Limited (ASX: WEB), Helloworld Ltd (ASX: HLO) –ex-Jetset Travelworld, and Holdings Limited (ASX: WTF).

Here are three reasons why they could be wrong…

1)      When you consider that Flight Centre has delivered average shareholder returns of more than 50% a year over the past five years, a prospective P/E ratio of just 17 times earnings in the 2015 financial year suggests the company is cheap at current prices.

2)      A growing portion of company’s earnings are derived from offshore, including China, India, the United Kingdom, South Africa and Dubai amongst others. The USA is growing revenues at a fast pace, but is not yet profitable. That could be expected to change in the near future.

3)      Flight Centre holds $1 billion in cash and growing fast, with around $600 million of that in customers’ funds (prepaid for travel), giving the company a ready float that it can earn investment income on – for free.

Add in the prospect of a lower Australian dollar, which would boost offshore earnings, compound earnings per share growth of 12% over the past five years, low levels of debt and excellent management with a significant stake in the business, and Foolish investors might want to take advantage of the recent pullback in share price.

My family owns shares in Flight Centre, and I may take the opportunity to top up my holdings (once Motley Fool trading policy allows). But if you’d like another great investing idea, take a look at this.

The top ASX pick you’ve never heard of…

Top Motley Fool analysts just identified their #1 ASX pick for 2014, a small-cap stock that could be poised for big gains (and offers a fat, fully franked dividend!). Discover all the details now, including the name and code, in this FREE investment report, "The Motley Fool’s Top Stock for 2014."

Motley Fool writer/analyst Mike King owns shares in Flight Centre. You can follow Mike on Twitter @TMFKinga

FREE REPORT: Five Cheap and Good Stocks to Buy now…

Our Motley Fool experts have FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.7% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.