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Why the Webjet share price has flown 43% higher in 4 months

The Webjet Limited (ASX: WEB) share price has been one of those quiet performers in recent months.

Since hitting a 52-week low of $9.98 per share in early October, the travel group’s shares have surged 43.29% to $14.30 per share. That’s impressive growth, but it has been a rollercoaster couple of years for shareholders in 2019 and 2020.

Why is the Webjet share price flying higher? 

The travel group enjoyed a strong finish to the year and that momentum looks to be continuing this year.

In November, the Webjet share price jumped 10% after a solid trading update and positive outlook for FY 2020. CEO John Guscic reported a positive start to the new financial year including growth from its WebBeds business.

Difficult trading conditions are facing the Webjet OTA business, despite a solid result in FY19. The group’s Cars and Motorhomes segments had a strong year in New Zealand despite loss of share and reduced capacity for Webjet’s Cruise segment under Online Republic.

There was strong margin improvement, which is a big positive in an industry with increasing competition. However, an increase in FY20 guidance was the big kicker that sent the Webjet share price jumping higher. 

Webjet lifted its guidance for first half and full year underlying earnings before interest, tax, depreciation and amortisation, as the strong growth looks set to continue. The updated guidance range of $157–167 million represents growth of 26– 34%, compared to FY19 numbers.

Is Webjet the best travel stock on the market?

ASX rival Corporate Travel Management Ltd (ASX: CTD) has also enjoyed similar share price growth to Webjet in recent times. Over that same period (since October), the Corporate Travel share price is up 25.28%, trailing Webjet’s gains.

Corporate Travel offers a 1.81% dividend yield compared to Webjet’s 1.54%. Over the last 12 months, the Webjet share price is up 18.77% while Corporate Travel is down 7.97% in the same time.

Both have underperformed the S&P/ASX 200 Index (INDEXASX: XJO) in this period but have started 2020 in promising fashion.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. 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.

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