Why I'm buying Flight Centre shares

The Flight Centre Travel Group Ltd (ASX: FLT) share price has dipped 9% this month. Here's why I think Flight Centre shares are a buy.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

At the beginning of October, Flight Centre Travel Group Ltd (ASX: FLT) shares were available for $47.43 per share. At this price, I considered Flight Centre shares to be a worthwhile investment.

Since then, FLT shares have fallen in price by 9%, off the back of an announcement that stated H1 profit for Flight Centre would be below that of the previous year. This comes despite total transaction volume (TTV) increasing. The reasons given for this fall in profit were tougher trading conditions and increased costs. A one-off cost associated with re-accommodating customers due to the collapse of Thomas Cook was also mentioned in this announcement.

Reasons to buy FLT shares

The announcement made by Flight Centre and the subsequent share price fall are disappointing events for investors. However, I still consider FLT shares to be a worthy investment. In fact, for me, the lower share price has increased their appeal.

In my eyes, the main reason to own Flight Centre shares is to gain exposure to the excellent growth opportunities this company has internationally and in the corporate travel space. From my perspective, the value of this opportunity is not significantly hurt by short-term changes in trading conditions. This is because market conditions should be expected to vary over the short-term. If these changes were seen as more permanent there would be much more cause for concern.

Additionally, Flight Centre has a long track record of delivering strong returns to shareholders. This is evidenced by a return on equity in excess of 20% over the past 10 years, achieved while maintaining low debt, and growing dividends. This gives me confidence that Flight Centre will be able to withstand tougher trading conditions for short periods of time. A company with a shorter history of success might be harder to trust in these circumstances.

Foolish takeaway

It is my view that FLT shares are a good buy at their current price, in comparison to what else is available on the ASX.

Buying FLT shares is not without risks and changes in trading conditions could lead to some variance in the FLT share price. However, over the long-term, as Flight Centre grows internationally, so too should its share price, leading to what I believe will be good returns for investors.

If you are less keen on Flight Centre, ARB Corporation Limited (ASX: ARB) is another high-quality stock that has seen its share price fall in October and might be worth considering.

Motley Fool contributor Mitchell Perry has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited. The Motley Fool Australia has recommended ARB 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 Scott Phillips.

More on Share Market News

Young girl drinking milk showing off muscles.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a great end to the trading week for ASX investors today.

Read more »

Hands reaching high for a trophy with a sunset in the background.
Record Highs

The ASX 200 Index is on its way to another all-time high today. Here's why

These blue chip stocks are driving the index towards a new record today...

Read more »

Group of friends trading stocks on their phones. symbolising the 3 most traded ASX 200 shares today
Share Market News

3 ASX mining stocks topping the most-traded list in October

Chinese stimulus news and company announcements likely contributed to the higher trading activity.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Share Gainers

3 ASX 200 stocks smashing the benchmark this week

These three ASX 200 stocks are leading the charge this week. Here’s how.

Read more »

Two people tired and resting after sports race.
Broker Notes

Fundie rates 2 ASX 200 stocks in short-term pain but with long-term gain potential

Blackwattle Investment Partners sees these 2 ASX 200 stocks as worthy of a buy and hold strategy.

Read more »

A young woman holding her phone smiles broadly and looks excited, after receiving good news.
Share Gainers

Why A2 Milk, EOS, GQG, and Mineral Resources shares are racing higher today

These shares are ending the week strongly. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Megaport, Pilbara Minerals, Vysarn, and WiseTech shares are falling today

These shares are ending the week in the red. But why?

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »