The Flight Centre Travel Group Ltd (ASX: FLT) share price has come back like a phoenix from the flames in the last few months and been one of the biggest movers on the Australian share market.
With their 1.1% gain yesterday, Flight Centre's shares have now climbed almost 40% in just the last three months.
Is it too late to invest?
Unfortunately I think it may be. Whilst I am a big fan of the company and have been naming it as a share to buy for a while, I think its shares have rallied to such a degree that they are arguably overvalued now.
At a little under 19x estimated FY 2017 earnings, Flight Centre's shares are trading at a significant premium to their historical average.
Over the last decade its shares have traded on an average price-to-earnings multiple of just 14x, according to data provided by CommSec.
In my opinion this points to limited upside potential for its shares at the current price.
I'm not alone in this view either. Research notes out of Morgan Stanley and Deutsche Bank in the last few weeks have given the travel agent underweight and hold ratings, respectively.
Furthermore, the two investment banks have price targets of $25.00 and $31.00, whereas Flight Centre's shares closed trade yesterday significantly higher at $39.86.
What now?
Whilst I am optimistic that Flight Centre will deliver a stellar second-half thanks to its cost-cutting program and improvements in airfare prices, I'm still not convinced it will be enough to justify its shares trading at such a premium.
In light of this I would suggest investors hold off an investment in the travel agent and consider its rivals Corporate Travel Management Ltd (ASX: CTD) and Webjet Limited (ASX: WEB) instead.
