How do you value the Flight Centre (ASX:FLT) share price?

What are the travel agent’s shares actually worth?

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The Flight Centre Travel Group Ltd (ASX: FLT) share price has been on a rollercoaster ride during 2021. Its shares reached a post-COVID high of $25.28 last month before pulling back almost 30%.

It appears that investors have mixed feelings about the value of Flight Centre shares in the current climate.

At Wednesday’s market close, Flight Centre shares finished up 0.44% to $18.37.

How do you value Flight Centre shares?

The most common way to value an ASX share is to calculate the company’s price-to-earnings (P/E) ratio. Traditionally, this metric is used to provide more clarity on whether a company is overvalued or undervalued.

A P/E ratio can be broken down as the relationship between a company’s share price and its earnings per share (EPS).

Currently, Flight Centre has a negative P/E ratio of 2.66. The formula to work out the P/E ratio is the current share price divided by EPS.

Essentially, this means that the company is losing money and is not making any profit over the last 12 months.

Government-mandated lockdowns and restrictions on international and domestic travel significantly weighed on the company’s revenue streams. 

In the Flight Centre’s annual general meeting (AGM), management highlighted that demand remains for overseas travel. Leisure enquiries and quotes have surged for key locations as people look to book a much-needed holiday.

Fully-vaccinated passengers are offered more freedom in travelling across Trans-Atlantic and other international destinations. For example, United States travellers can fly to the United Kingdom, and Fiji opened its borders to vaccinated passengers after an 18-month hiatus.

Flight Centre said that more countries are accepting to live with the virus, with various international routes restarting.

The company is targeting a return to monthly profitability during FY22. However, this is based on the expectation that international travel continues to gradually return and that Australian domestic borders remain open.

Sales revenue increased month-on-month. In particular, leisure and corporate recovery in the United States during Q4 FY21 ticked up a notch. Flight Centre noted that corporate transaction numbers were at 50% before COVID-19, representing around 40% of total transaction value (TTV).

All eyes will be on Flight Centre’s H1 FY22 results scheduled to be released on 24 February 2022.

Flight Centre share price snapshot

Over the last 12 months, Flight Centre shares have lifted by around 10% since hitting near COVID-19 lows in August.

Currently, the company’s share price is hovering around in the middle of its 52-week range of $13.59 to $25.28.

Based on valuation grounds, Flight Centre has a market capitalisation of around $3.67 billion, with approximately 199.57 million shares on issue.

Should you invest $1,000 in Flight Centre right now?

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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