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Here’s why Cover-More Group Ltd shares have surged higher today

Cover-More Group Ltd (ASX:CVO) has staged a major recovery this morning after falling heavily on Thursday, which came as a result of a surprise profit downgrade issued by Flight Centre Travel Group Ltd (ASX: FLT).

Since bottoming out at $1.71 yesterday, the stock has since risen to a high of $2.08, reflecting a 21.6% turnaround. It has risen 14.3% today alone.

Cover-More eased investors’ concerns this morning after it issued its own update. It said that it is still comfortable with market expectations for profit in FY15, stating that EBITDA between $53.8 million and $56.9 million should be achieved despite the tumbling Australian dollar (against the US dollar) and the challenging economic conditions in Australia.

Although Cover-More’s shares could remain volatile in the near term, the stock does offer plenty of long-term growth potential. As it noted in its update, its “multi-line business model is resilient and continues to deliver growth in profits”. It should be noted that Australian outbound travel has grown historically even through periods of terror alerts, disease outbreaks and even through the GFC, and the same should be maintained through these tough economic conditions.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.

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