Flight Centre Travel Group Ltd (ASX: FLT) provides a complete leisure and business travel service in Australia, New Zealand, the United States, Canada, the United Kingdom, Africa, Middle East, Asia and Europe.
It has more than 30 brands, which provide not only flight bookings but also holiday packages, accommodation, rail and cruises. There are also travel shops that sell maps, gift cards, car hire bookings and insurance.
An enviable track record
Flight Centre has consistently improved earnings and should do so. Shareholder return, measured as the average annual rate, was 63.6% last financial year. Remarkably, it has averaged 63.7% for each of the last five years. Actual earnings per share were 98 cents for the year ending June 2009; 138.8 cents for 2010; 170.8 cents for 2011; 198.6 cents for 2012; and 244.2 cents for 2013. Future estimated earnings are 269.9 cents for the 2014 financial year; 301.6 for 2015; and 338.7 cents for 2016.
Over the last 10 years the ratio of debt to equity has never been as high as 30% and ended last financial year at 4.5%. In itself, that is a remarkable achievement for a company with such high ongoing growth. Return on equity has been maintained at 20% or more for each of the last four years.
In fact the lowest it ever reached was 16% in the June 2009 year following the Global Financial Crisis (GFC). Although the price temporarily dropped from $32 to $3.39, the GFC failed to impact the long range trajectory of this company, which now trades over $50.00.
Evolution
The main reason Flight Centre is so successful is that it continuously innovates. As it evolves, its revenue and profitability grow. The current strategic plan focuses on changing the company from a leisure and corporate travel agent into a best-in-world travel retailer.
Foolish takeaway
At a price to earnings ratio of 20, this share is reasonably priced for its growth trajectory. However, looking at past price movements, I would recommend buying it if it pulls back to around $52.50.
