Flight Centre Travel Group Ltd (ASX: FLT) shares gained 1.2% on Thursday, bucking the trend of the wider S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) which ended the session 0.1% lower.
Perhaps surprisingly for many, the one-year share price return from owning Flight Centre is roughly the same as the return from holding the shares for one day!
Of course when put it into the perspective of the near 13% slide in the index over the past year, a small gain isn't bad. However on an absolute basis it is disappointing.
Despite the lacklustre absolute returns from holding Flight Centre's shares over the past 12 months, given the superb longer term track record of the company, there are plenty of reasons to stick with the stock.
- Double digit growth – The recently released half year results reported record total transaction value (TTV) up 12.8% to $9.2 billion. This equated to an increase of over $1 billion in TTV on the previous corresponding period.
- Balance sheet strength – Flight Centre boasts a rock solid balance sheet with $430 million in general cash and just $21 million in debt. This strength will allow the group to act swiftly if it sees an attractive opportunity for deploying its cash reserves.
- Growth by acquisition – During the six months to December, Flight Centre undertook numerous strategic acquisitions. Some of these acquisitions related to its Corporate Travel business, while other acquisitions furthered its online product offering.
- Dividend – Flight Centre retains around 40% of its earnings while paying out the remaining 60%. This ratio suggests plenty of scope for increasing the dividend considering the high cash balance or if the board decided to switch focus towards income and away from growth. Based on a forecast dividend of 169.6 cents per share (cps) in financial year (FY) 2017, the stock is offering a fully franked yield of 3.9%. (Source: Thomson Consensus Estimates)
- Value – With analysts forecasting earnings per share to rise to 291.5 cps in FY 2017, the stock is trading on a prospective price-to-earnings ratio of 14.9 times. That's hardly demanding for a market leader with a highly regarded owner-manager and plenty of global growth opportunities.
