Webjet Limited jumps 7% on company update: Should you buy?

Credit: Roger Schultz

Online airfares booking company Webjet Limited (ASX: WEB) released a non-market sensitive announcement to the market this morning. Although it did little more than confirm that Total Transaction Value (TTV) has continued growing at around 28%, similar to the first half of 2016, shares rose 7.8% to $6.33 on the news at the time of writing.

Management also announced that the recent acquisition of Sunhotels was performing above expectations in the lead-up to the crucial European summer holiday period. However, it could be that investors were enticed by the company’s comment that ‘we continue to achieve market share gains’, which is a subtle stab at competitors like Flight Centre Travel Group Ltd (ASX: FLT) and Helloworld Ltd (ASX: HLO).

Surprisingly, Helloworld also recently announced a positive update, with TTV expected to come in between $5.3 billion and $5.4 billion for the full year, compared to $2.4 billion reported in the six months to December.

It seems as though conditions in the travel industry are not as bad as expected, and shares in Flight Centre also rose 3% today, despite the fact that they usually fall as soon as a competitor mentions the words ‘market share’.

Snatching up a bargain

Of the three businesses, Flight Centre is my favourite. It’s the cheapest, has the best dividend, an outstanding balance sheet, and a number of growth initiatives internationally. Helloworld and Webjet trade at ~22 and ~29 times earnings respectively, compared to Flight Centre’s more modest 13. Investors will want to watch the market share issue, as Flight Centre has previously lost a small amount of market share to competitors.

Although I prefer Flight Centre, all three companies have great balance sheets with minimal debt, and considerable growth prospects, although they have been using acquisitions to generate growth recently. Before purchasing, interested investors should be sure to do their research in order to better differentiate the companies and decide which prospect they prefer.

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Motley Fool contributor Sean O'Neill owns shares of Flight Centre Travel Group Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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