Flight Centre share price down 40% in less than 12 months

The Flight Centre Travel Group Ltd (ASX: FLT) share price has fallen more than 40% in less than 12 months. Is it a buying opportunity?

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The Flight Centre Travel Group Ltd (ASX: FLT) share price has fallen more than 40% in less than 12 months. This contrasts the S&P/ASX 200 (INDEXASX: XJO) index, which has risen over this same time period. Although FLT shares did manage to rebound slightly in May, they still appear out of favour with investors and out of sync with the rest of the market.

The performance of Flight Centre

When a stock falls as dramatically as Flight Centre, it can mean a great buying opportunity. Especially, if that stock has a strong history of financial success. In the last 10 years, Flight Centre has averaged a return on equity of over 20%. Flight Centre has also more than doubled its earnings per share and reduced its debt to very low levels. These to me are signs of financial success.

Despite these positive financial metrics, I am not yet tempted to invest in Flight Centre shares. The latest half-yearly results from Flight Centre appear, to me, to describe a company that is facing significant challenges and changes. This is not surprising given the increasing ease of searching for travel deals and booking travel online. Attempting to adapt to these changes in the industry is by no means a bad thing. That being said, with 90 stores closed in the second half of FY18, margins which are expected to continue declining and a business which is described as 'predominantly offline', Flight Centre appears to still have a long way to go.

Foolish takeaway

Based on my own intrinsic value calculations, I believe the FLT share price is currently too high to justify an investment. Even if Flight Centre shares were fairly valued, I wouldn't be investing. Instead, I'd be waiting for an opportunity to buy when there is a discount to my own calculated value of the Flight Centre shares. Buying at a discount offers protection against the value of Flight Centre shares falling, if the business cannot successfully adapt to the changing industry. Whether or not this type of buying opportunity will present itself can't be known. Therefore, the only approach is to wait and see or look at investment opportunities elsewhere.

One place to start looking is this little-known ASX company set to skyrocket off the coming marijuana boom…

Motley Fool contributor Mitchell Perry has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited. 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.

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