Flight Centre Travel Group Ltd (ASX: FLT) shares have been on a rollercoaster since the start of the COVID-19 pandemic. At first there was a crash, then a slow but steady rise. However, since the start of May 2022, the Flight Centre share price has actually gone through a 30% decline.
The ASX travel share has been telling investors about a recovery in demand, which logically should mean higher profit. But, how much profit is being projected?
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Recovery of demand
At the company's annual general meeting (AGM), the business said that there are some supply challenges – such as airline capacity – early in FY23. However, Flight Centre said those challenges don't appear to be impacting customer demand. The leadership noted that the market generally grows year over year.
In June 2022, various businesses were tracking at near or pre-COVID total transaction value (TTV) levels on a monthly basis as a result of "both the rapid demand uplift after borders reopened and higher than normal airfare prices".
Flight Centre also said that demand is increasing in both leisure and corporate travel. The revenue margin was "holding steady" year over year, "and expected to increase as market conditions normalise and as new initiatives gain transactions".
On top of that, Flight Centre also noted that its cost margin is tracking at 10%, a level that it historically aspired to.
Its corporate business reported that September and October were the two strongest TTV months in its 30-year history in corporate travel. Management also said that it's seeing positive trends in the leisure sector, though Australian short-term resident departures in August 2022 were at 63% of August 2019.
Flight Centre managing director Graham Turner said:
Travel is, however, at a relatively early stage on the path to recovery… and there is considerable pent-up demand that is not yet fully translating to bookings, which means there is also ongoing upside potential.
In business travel, for example, our recovery is being driven by very high customer retention rates and large volumes of new account wins – rather than by overall client activity returning to pre-COVID levels.
It's expecting FY23 first-half underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be between $70 million and $90 million, up from a loss of $184 million in the prior corresponding period.
Profit projections for Flight Centre shares
Looking at earnings per share (EPS) is one of the best ways to see profitability, in my opinion.
It puts the net profit in per-share terms and gives context to the share price. I don't think there's much point to growing net profit if it's not boosting the underlying value of each share. Growing EPS is one of the key factors that can help grow the Flight Centre share price in the future.
According to Commsec, the business could generate 31.4 cents of EPS in FY23. This would put the Flight Centre share price at 50x FY23's estimated earnings.
That may seem like a very high price/earnings (p/e) ratio. But, it's still in the recovery phase. I think it's worth pointing out that earnings are expected to more than triple to $1.035 in FY24. That would equate to it being valued at 15x FY24's estimated earnings.
Of the analyst ratings that Commsec has collated on Flight Centre, there are three buys, two sells and eight holds.
