The Corporate Travel Management Ltd (ASX: CTD) share price is down 13.3% since the beginning of May, closing at $22.80 yesterday.
The company, a travel management solution for corporate businesses, has recently experienced strong volatility in its share price due to market news on acquisitions, earnings and general performance.
Why Corporate Travel is making headlines
According to a recent article from the Australian Financial Review, Morgans anticipates that Corporate Travel won't beat analyst expectations in its full-year guidance. The broker cut its price target from $31.65 to $27.50 as a result of adjusting 2020–21 earnings by 3.1%. This adjustment is driven by geopolitical uncertainty looming over markets and Australia's recent election slowing down the travel industry.
This news came after the company announced its current Global CFO, Stephen Flemming, is being re-assigned as regional CFO of its European unit. Search for a replacement has commenced, though investors are clearly unhappy about this happening so close to the company announcing its 2018–19 earnings. This has sunk the share price 8% over the past week to its current close price.
Similarly, rumours of a potential merger with Flight Centre Travel Group Ltd (ASX: FLT) have surfaced. But this has been quickly shut down by Flight Centre's CEO, Graham Turner, as well as a spokeswoman from Corporate Travel. On the acquisition front, speculation has risen around Corporate Travel's acquisition of UK's Capita. This deal, however, will not be complete prior to year-end.
Foolish takeaway
Corporate Travel has bounced back after hedge fund VGI Partners accused the company of operating ghost offices and of unlawful revenue recognition practices. This bounce was partly a result of strong half-year results reported in February. EBITDA was up 21%, causing underlying EPS to ride 17% to 39.4 cents at the time these results were reported. Half-year dividends were also up by a whopping 20%.
As it stands, Corporate Travel is still set to hit $150 million full-year EBITDA. This is at the top end of its earnings guidance range, which was previously cited between $144 million to $150 million, which is 20% higher than last year. The company is also expecting strong growth from its recent acquisition of Lotus Travel. This will boost revenue from Asian segments in 2019–2020.
At this price, I think Corporate Travel is an attractive buy opportunity, especially with its unrealised potential upside of 20%. If you've been looking for a good investment in the travel industry, Corporate Travel has strong fundamentals, which are only improving.
However, if the travel industry isn't for you, perhaps you should take a look at this growing segment…
