There are few blue chips on the ASX that have done as well as Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) over the past two years.
The Flight Centre share price is up 50% despite its recent fall and Webjet shares have risen 55% if you start from November 2016.
Despite the impressive growth, both arguably are trading on reasonable valuations. Flight Centre is trading at 18x FY19's estimated earnings and Webjet is trading at 25x FY19's estimated earnings.
In the FY18 results they both posted solid results. Webjet's continuing earnings per share (EPS) grew by 10% and Flight Centre's EPS increased by 14%.
There is definitely industry consolidation/market share winning going on at the moment. The travel agents that are the biggest can access the best deals, offer the best prices for customers and win more volume, furthering their advantage.
Webjet's online model has proven to be particularly successful whilst Flight Centre's sheer size is a large advantage compared to most competitors. Flight Centre's total transaction value was seven times larger than Webjet's in FY18.
In the long-term both businesses have seemingly good tailwinds with the growing number of retirees. People in their golden years will want to travel around the country and see the world. There's also a growing trend among young people preferring to travel rather than take on huge levels of debt for a house.
Foolish takeaway
Considering Flight Centre is down 23% over the past two months and Webjet is down 13% over the past month I think the valuations have factored in some of the shorter-term risks. For example, if Australia's economy hits a bumpy patch then holidays may be one of the first things struck from a household budget.
Interested investors could decide to buy some today, however they are not on my own watchlist.
