MENU

What does 2015 hold for Flight Centre Travel Group Ltd shareholders?

2014 has been a frustrating year for Flight Centre Travel Group Ltd (ASX: FLT) shareholders. The company’s share price rose strongly at the start of the year from around $46 to over $55 but has since drifted back to below $36 following a fall in consumer confidence and continued weakness in the domestic travel industry. So could now be the time to buy?

Lookin’ Cheap

Flight Centre is trading on a trailing price to earnings ratio (PE) of 17, and forward PE of just 13 for the 2015 financial year, and 12 for the 2016 financial year.  Flight Centre’s management team reiterated in October a forecast for 5-8% growth in underlying earnings in the 2015 financial year, however this will be skewed towards the second half, which has convinced some analysts and investors that the best growth years may be over.

Amazing Growth

Flight Centre has an incredible record! The company has been able to grow revenue in all but one year of the last 10, and has maintained profitability throughout the GFC and the various events that have depressed the international travel market.

The last five years have seen a 50% increase in profit and a massive five-fold increase in the dividend payout to investors. The group’s return on equity has averaged over 25% and EBIT margins have increased nearly four percentage points to 13%.

Global Diversification

Flight Centre has operations in Australia, New Zealand, USA, Canada, the UK, South Africa, India, Singapore, China, Hong Kong and the UAE through its 32 brands that cater for the leisure, corporate, and wholesale markets, as well as a range of brands that handle international money transfers, among other travel-related services.

Around 40% of group revenue is sourced from overseas, however it accounts for only 20% of earnings. This can be attributed to spending on growth initiatives and lower margins in some regions where Flight Centre is not the dominant brand. Australian growth is slow, and is a concern for shareholders in 2015. If the company is to achieve its profit growth aim it will need the local economy to pick up significantly or its overseas brands to pick up some slack.

One company in a slightly stronger position and requires no introduction to most investors has been selected as The Motley Fool's top pick for 2015. Be among the first to get the name and code right now. (Hint: It's a sexy ASX tech company!) Simply click here for your FREE copy... BEFORE the investing crowd gets wind of this!

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

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.