Flight Centre Travel Group Ltd shares surge higher on acquisition news

The Flight Centre Travel Group Ltd (ASX:FLT) share price has continued its strong run and is 4% higher today. Here's what you need to know…

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One of the biggest movers on the market today has been the Flight Centre Travel Group Ltd (ASX: FLT) share price.

In afternoon trade the travel agent's shares are up 4% to $45.25.

Why are its shares higher?

This morning Flight Centre announced plans to fast-track its growth in the New Zealand market through the acquisition of two leading travel businesses.

According to the release, the company has acquired Travel Managers Group and Executive Travel Group for an undisclosed amount.

Management has, however, advised that the acquisitions have been made in line with normal transaction multiples and will be funded through its cash reserves.

What do these companies do?

Travel Managers Group is a leisure-focused company providing systems and support services to a network of more than 180 individual brokers. It operates a franchise network of 22 shops and generated NZ$120 million in total transaction value during its 2017 financial year.

Executive Travel Group is New Zealand's largest independent corporate travel management company and generated NZ$60 million in total transaction value during the 2016 calendar year.

Management believes that these two acquisitions will speed up its growth in the New Zealand market, putting it in a position to deliver NZ$1.5 billion in sales in the country during FY 2018.

Should you invest?

Whilst I do think that Flight Centre's shares are a little on the expensive side and would prefer to invest at a cheaper price, I do believe the significant number of acquisitions the company has made in the last 18 months puts the company in a strong position to deliver above-average earnings growth over the next decade.

This could ultimately make it worth paying a premium to own its shares today.

Alternatively, investors could take a look at Corporate Travel Management Ltd (ASX: CTD) or the shares of Webjet Limited (ASX: WEB) following its recent decline.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Corporate Travel Management Limited and Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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