The Webjet Limited (ASX: WEB) share price could soar higher from here according to a Livewire article written by Naheed Rahman from Flinders Investment Partners.
In Webjet’s recently-announced FY18 report it revealed some impressive continuing-operations numbers. Revenue was up 54% to $291 million, earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 71% to $87.4 million and net profit after tax (NPAT) increased by 30% to $43.2 million.
The per-share statistics weren’t as exciting with earnings per share (EPS) up by 10% to 37.5 cents and the dividend up by 14% to 20 cents per share.
Despite Webjet’s impressive share price rise of nearly 20% over the past week, Mr Rahman thinks Webjet is still an attractive growth option.
Firstly, compared to other growth shares it has a much better forward earning valuation compared to shares like Altium Limited (ASX: ALU), WiseTech Global Ltd (ASX: WTC), Nextdc Ltd (ASX: NXT) and Xero Limited (ASX: XRO). Webjet is a more palatable 30x FY19’s estimated earnings.
Second, nearly all of Webjet’s segments are performing very well. So well that the company beat its own guidance. Mr Rahman thinks Webjet can continue to achieve 25% to 30% EPS growth over the next few years.
Third, cashflow by Webjet is very strong. The group’s cashflow conversion was 97% in FY18 and should be able to achieve at least 90% over the foreseeable future.
Finally, he reminded investors that in August 2016 Webjet signed a partnership with Thomas Cook, one of Europe’s leading holiday companies. As part of the agreement, Webjet’s B2B business took over responsibility of Thomas Cook’s hotel inventory over a transition period. From mid-2019, the contract becomes a volume-based fee. Mr Rahman thinks this will boost FY20 earnings in a very positive and significant way.
I agree with his points. Webjet is not a business I have been actively following, but it appears to have a bright future – even with the recent price rise already booked in. I’d be happy to buy a small parcel at today’s price, though it’s not in the industry I’d personally normally invest in.
Indeed, one of these top growth shares is a great way to profit from a huge investment tailwind.
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Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of Altium, WiseTech Global, and Xero. The Motley Fool Australia has recommended Webjet Ltd. 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 Scott Phillips.