Why is the Corporate Travel share price charging higher on Wednesday?

This travel company appears to believe that its shares are undervalued.

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The Corporate Travel Management Ltd (ASX: CTD) share price is catching the eye on Wednesday.

In morning trade, the corporate travel specialist's shares are up 3.5% to $17.06.

Why is the Corporate Travel share price pushing higher?

Investors have been buying the company's shares this morning after responding positively to the release of an announcement this morning.

According to the release, thanks to the strength of its balance sheet, the Corporate Travel board has decided to return funds to shareholders via an on-market share buy-back.

The company advised that it is implementing the buy-back program to repurchase up to a maximum of $100 million worth of Corporate Travel shares. It will commence on 15 November and run for approximately 12 months.

Management believes the share buy-back program enhances its shareholder returns and complements the company's intentions to pay dividends in the future.

It plans to buy back shares at such times and in such circumstances as it is considered beneficial to the efficient capital management of the company. Because of this, the buyback is therefore dependent on market conditions, volumes, and other relevant factors. The company advised that it reserves the right to suspend the buy-back program without notice or terminate it at any time.

In addition, it notes that the prices paid for shares purchased under the buy-back will be no more than 5% above the volume-weighted average price of its shares over the five trading days prior to the purchase.

Is this a good idea?

The team at Goldman Sachs is likely to approve of this move. Its analysts currently have a buy rating and a $20.50 price target on the company's shares. This implied a 24% upside from where the Corporate Travel share price ended Tuesday's session, which appears to indicate its belief that the company was materially undervalued.

Trading update

Also giving the Corporate Travel share price a boost today has been a trading update.

It revealed that first-quarter revenue increased 36% to $187.9 million and underlying EBITDA lifted 157.3% to $56.6 million.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Corporate Travel Management and Goldman Sachs Group. The Motley Fool Australia has recommended Corporate Travel Management. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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