At the beginning of October, Flight Centre Travel Group Ltd (ASX: FLT) shares were available for $47.43 per share. At this price, I considered Flight Centre shares to be a worthwhile investment.
Since then, FLT shares have fallen in price by 9%, off the back of an announcement that stated H1 profit for Flight Centre would be below that of the previous year. This comes despite total transaction volume (TTV) increasing. The reasons given for this fall in profit were tougher trading conditions and increased costs. A one-off cost associated with re-accommodating customers due to the collapse of Thomas Cook was also mentioned in this announcement.
Reasons to buy FLT shares
The announcement made by Flight Centre and the subsequent share price fall are disappointing events for investors. However, I still consider FLT shares to be a worthy investment. In fact, for me, the lower share price has increased their appeal.
In my eyes, the main reason to own Flight Centre shares is to gain exposure to the excellent growth opportunities this company has internationally and in the corporate travel space. From my perspective, the value of this opportunity is not significantly hurt by short-term changes in trading conditions. This is because market conditions should be expected to vary over the short-term. If these changes were seen as more permanent there would be much more cause for concern.
Additionally, Flight Centre has a long track record of delivering strong returns to shareholders. This is evidenced by a return on equity in excess of 20% over the past 10 years, achieved while maintaining low debt, and growing dividends. This gives me confidence that Flight Centre will be able to withstand tougher trading conditions for short periods of time. A company with a shorter history of success might be harder to trust in these circumstances.
It is my view that FLT shares are a good buy at their current price, in comparison to what else is available on the ASX.
Buying FLT shares is not without risks and changes in trading conditions could lead to some variance in the FLT share price. However, over the long-term, as Flight Centre grows internationally, so too should its share price, leading to what I believe will be good returns for investors.
If you are less keen on Flight Centre, ARB Corporation Limited (ASX: ARB) is another high-quality stock that has seen its share price fall in October and might be worth considering.
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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. The Motley Fool Australia has recommended ARB 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.