The S&P/ASX 200 Index (ASX: XJO) travel share Corporate Travel Management Ltd (ASX: CTD) has seen its valuation plunge more than 50% since April 2022,
Some investors may think this is an excellent opportunity to invest because the company is trading at a much lower price, yet the business is still growing.
The ASX share claims to be a leading global corporate travel operator. According to its FY24 first-half result, it was the fourth or fifth largest travel management company in the world.
Corporate Travel generates around 80% of its revenue offshore. It has a client base of 5,700, with around 40% of the client base represented by government and essential travel clients. It says it ranks number one in Asia (outside of China), number two in the United Kingdom, number two in Australia and New Zealand and number four in the United States.
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Growth is expected
The Global Business Travel Association (GBTA) forecasts that the global corporate travel market will grow more than 3% per annum between FY25 and FY29.
Corporate Travel plans to double its FY24 profit by FY29, which translates into a compound annual growth rate (CAGR) of 15%. The company said the key metrics required to execute this plan are "already being met or exceeded."
Corporate Travel aims to win new sales of $1 billion, progressively rising each year to $1.6 billion by FY29 – this will help compound its revenue at 10% per annum. It's aiming to keep its annual cost growth at or under 5% per year, and the ASX 200 share is succeeding at its revenue per full-time employee target.
The company believes there are opportunities emerging for acquisitions. Any deals done will add further economies of scale and complement the above-mentioned growth numbers.
Of course, growth is not guaranteed and it's possible the business may not hit its targets.
ASX 200 share's valuation
Owners of Corporate Travel shares could benefit from the predicted rising profit. Demonstrating its ability to keep growing could lead to investors valuing the business at a higher earnings multiple than what it's currently trading at.
According to estimates on Commsec, the ASX 200 share is valued at 14x FY25's estimated earnings and 12x FY26's estimated earnings. Corporate Travel expects ongoing growth after these two years – it's a five year growth strategy, after all – so these valuation figures don't seem demanding at all if it delivers on its goals.
