Webjet Limited (ASX: WEB) shares on Tuesday bounced off their 52-week lows to finish almost 3% higher following an investor presentation.
Management provided additional information to their FY2018 earnings guidance, stating its pro forma EBITDA figure would likely be 11% higher had its recent acquisition, JacTravel, been completed by 1 July 2017.
On 22 November, management announced FY2018 EBITDA is expected to be $80 million, an increase of 14% on the previous period. The market was clearly expecting more, as Webjet shares were subsequently sold off to the tune of 20% before Tuesday's gains.
The company's shares currently trade on a trailing P/E ratio of less than 18x, which could be cheap given management's 3-year growth outlook. In the Business-to-Consumer (B2C) segment, Webjet has targeted bookings growth of more than 3x the underlying industry rate, and more than 5x the industry rate for Business-to-Business (B2B).
Whilst this might seem optimistic, Webjet is already exceeding their target growth rate in B2C and subsidiary WebBeds is ahead of the B2B target.
Looking at Webjet's financial statements for FY2017, revenues grew at a faster rate than total expenses for the period, resulting in statutory net profit after tax (NPAT) growth of 146%. On the company's basis of continuing operations, NPAT rose 58%.
The balance sheet is in good shape, with high liquidity and a relatively small amount of interest-bearing debt. Webjet had just over $178 million in cash and cash equivalents at 30 June 2017, which, if divided by the approximate 118.3 million shares on issue, equates to around $1.50 of cash per share. If you subtract this amount from the current share price of $9.51, the rest of Webjet is trading around 15x FY2017 earnings per share.
Turning to the company's statement of cash flows, Webjet generates positive operating cash flow and only has to invest a small amount in property, plant and equipment. Distributing less than 50% of profits from continuing operations as dividends in FY2017, Webjet can use its strong cash position to fund acquisitions, rather than relying on either bank debt or raising additional capital which dilutes earnings per share.
Foolish takeaway
I'll be keeping a close eye on the Webjet share price to see if Tuesday's rise is the start of a broader recovery, or just some shorter-term bargain hunting following the investor presentation. Considering the company's growth profile, I believe 18x FY2017 earnings could be a decent price to invest.
