Year-to-date the Experience Co Ltd (ASX: EXP) share price performance has been a bit of a disappointment and finds itself down 33.5% compared to a small gain by the benchmark S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
The majority of this decline came in the last two weeks after the adventure tourism company downgraded its full-year revenue and earnings guidance due to the impact of unfavourable weather conditions.
Instead of previous guidance of revenue in the range of $135 million to $140 million and EBITDA between $35 million to $37 million, management now expects revenue in the range of $127 million to $130 million and EBITDA of between $30 million and $31 million.
As a predominantly outdoor tourism company, inclement weather is a major issue for the company and reduces the number of days its businesses can operate.
While a little bad weather here and there is expected each year, the weather experienced over the last couple of months in North Queensland has been described as a once in a generation occurrence. As you might expect, this caused the forced closure of many of its businesses for a prolonged period of time.
Clearly this is a disaster for its FY 2018 results, but I think it is important to consider that this is unlikely to be repeated in FY 2019.
Which I believe makes the selloff of its shares a buying opportunity for investors today.
Especially given the tourism boom that Australia is experiencing and the growing preference for experience-based activities from Millennials.
As the largest player in the industry by some distance, I believe Experience Co is well positioned to benefit from increasing demand for adventure tourism.
Furthermore, following the selloff, I estimate that Experience Co's shares are changing hands at approximately 21x full-year earnings.
I don't think this is overly expensive given the fact that earnings growth should accelerate significantly in FY 2019, barring any unforeseen weather events.
Because of this, I would say that Experience Co's shares are in the bargain bin today and well worth considering as an investment alongside other tourism shares such as Crown Resorts Ltd (ASX: CWN) and Sydney Airport Holdings Pty Ltd (ASX: SYD).
