Although they have dropped back a touch now, this morning the shares of Webjet Limited (ASX: WEB) rocketed higher by over 5% to a new all-time high of $10.15.
The reason for today's rise is down to the fact that the online travel agency will join its rivals Flight Centre Travel Group Ltd (ASX: FLT) and Corporate Travel Management Ltd (ASX: CTD) as part of the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) as of 16 September 2016.
According to the release Webjet is one of six shares that will be included in the benchmark index at the expense of six current constituents which includes the likes of Cover-More Group Ltd (ASX: CVO) and Village Roadshow Ltd (ASX: VRL).
Shares will often rally when they are included in an index for various reasons such as being bought by index-tracking funds, meeting fund managers' strict investment requirements, or simply by coming onto the radar of the wider market.
Today's gain means its shares have now climbed by a stunning 78% this year alone. Whilst some may think they've missed the boat, I personally believe there is still an opportunity for a long-term investment here.
As well as recently announcing bumper full year results which saw revenue rise 30% to $154.5 million and net profit increase 27% to $22.2 million, Webjet also announced a potentially lucrative partnership with European travel company Thomas Cook that will see the transfer of around 3,000 hotel contracts to Webjet's Sunhotels.
I believe this puts Webjet in a very strong position to continue growing its earnings at a strong rate for some time to come, which more than justifies paying 32x full year earnings for its shares today.
