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Here’s why you can fly high with this ASX200 travel stock

International tourism has come a long way in the last 10 years. Flights into and out of Australia are more frequent and affordable, more comfortable and generally better. Australians have taken advantage of this trend by building some incredibly successful global businesses that combine the internet and travel.

Pleasingly for these businesses, and the many others around Australia that rely on tourism, there are more Australians travelling overseas and tourists coming to Australia than we’ve seen for a long time. The last set of tourist data released by the ABS showed that international arrivals increased by 8.7% over the past 12 months, and Australians travelling abroad increased by 8.1%.

Huge Numbers

These are great numbers for one of Australia’s brightest companies. Cover-More Group Ltd (ASX: CVO), sells travel insurance to individuals, and travel medical insurance and employee assistance to businesses. The company listed on the ASX back in December at $2 and reached a high of $2.49 in May, but has since fallen back to just $1.79.

Analysts are expecting earnings per share of around 8.5 cents this financial year, putting the company on a price to earnings ratio of nearly 22. That may seem high but earnings are expected to grow 20% to over 10 cents per share in 2015, which equates to a PE ratio of 17.

Additionally, aggressive growth is predicted to continue in this manner through to 2016, based on improving customer numbers and Cover More’s dominant position as Australia’s largest travel insurer.

Global Plans

Cover-More currently has operations in Australia, New Zealand, and the UK, and is in the process of developing a presence in India, China and Malaysia. I believe we will see a greater proportion of our domestic tourists come from Asia in coming years, so establishing a presence will be an important growth opportunity for the company.

Even the developed UK and New Zealand markets are still very much a growth option for Cover More. In the most recent results, almost 86% of the group’s pre-tax earnings came from Australia, while Asia and the United Kingdom contributed just 9% and 5% respectively. This is where growth will come from in future years.

A value price tag + growth + big dividends!

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Motley Fool contributor Andrew Mudie does not own shares in any companies mentioned. You can find Andrew on Twitter @andrewmudie

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