Near its 52-week low, this ASX growth stock could be the bargain of the year!

I think this stock could be a leading opportunity.

| More on:
Man waiting for his flight and looking at his phone.

Image source: Getty Images

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

The Corporate Travel Management Ltd (ASX: CTD) share price has fallen to a 52-week low, as we can see on the chart below. It's also down 32% since the start of 2024.

Created with Highcharts 11.4.3Corporate Travel Management PriceZoom1M3M6MYTD1Y5Y10YALL31 Dec 202319 Jun 2024Zoom ▾Jan '24Feb '24Mar '24Apr '24May '24Jun '24Jan '24Jan '24Mar '24Mar '24May '24May '24www.fool.com.au

The ASX travel share has lost investor confidence after the FY24 first-half result wasn't as strong as some investors were hoping.

Corporate Travel Management said macro issues beyond the control of the business impacted performance in the second quarter of 2024. That included negative travel sentiment relating to conflict in the Middle East, American client calendar-year travel budgets being fully utilised by the end of the FY24 first quarter due to "unsustainably high ticket prices" and a slower Chinese outbound recovery.

These issues affected FY24's second-quarter earnings before interest, tax, depreciation, and amortisation (EBITDA) by approximately $15 million.

It also said the UK bridging contract is "materially underperforming" compared to the client's initial expectations because of immigration challenges and timing delays. This is expected to have a $25 million impact to the full-year result.

But the ASX growth stock could have a very promising outlook for the rest of the decade.

Why the Corporate Travel Management share price could be undervalued

For starters, the business said the macro issues in the second quarter "appear to have dissipated, with the group experiencing a strong rebound in January 2024." These issues are "unlikely to impact 2H24".

The company has a five-year growth strategy to double its FY24 profit organically by FY29, which would represent a compound annual growth rate (CAGR) of 15%, with any acquisitions adding to the growth.

Firstly, the company is aiming to grow its revenue by at least 10% per annum over five years by winning new clients. The new win target starts at $1 billion per annum and will increase to $1.6 billion per annum by FY29.

Second, the ASX growth stock wants to keep its client retention rate of 97% each year. The company is expecting client activity will grow by 3% per annum, offsetting any client losses.

Third, it's hoping that its key projects will achieve revenue gains and savings over time, with a target of costs to only grow by 5% per annum. Revenue per full-time employee improvement will be a key performance measure of progress. Future projects are aimed at both market share growth and automation.

Fourth, Corporate Travel wants 50% of every new dollar of revenue to fall to the EBITDA profit line as it wins new clients, retains existing clients and implements the above-mentioned cost projects. This can translate into the EBITDA growing at a CAGR of 15% over five years.

Finally, any acquisitions are in addition to the above plans. Most acquisition targets are "highly leveraged with debt to survive COVID". The ASX travel share is "actively pursuing" these opportunities, which will add "further growth, shareholder value and economies of scale."

If the company executes its plans well and doubles its profit in the next five years, I think it could be a great market-beater, as long as technology and AI don't negatively disrupt the travel industry.

ASX growth stock valuation

According to the estimates on Commsec, the ASX growth stock is valued at 16x FY24's estimated earnings and just 12x FY26's estimated earnings.

Motley Fool contributor Tristan Harrison 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. The Motley Fool Australia has positions in and 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.

More on Growth Shares

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Growth Shares

The ultimate Australian stocks to buy and hold for 10+ years

These shares could be ultimate buys according to analysts.

Read more »

A smiling man take a big bite out of a burrito
Growth Shares

Looking for ASX growth shares? I rate these 2 as buys

I’m backing these investments to deliver big returns.

Read more »

A bland looking man in a brown suit opens his jacket to reveal a red and gold superhero dollar symbol on his chest.
Growth Shares

Macquarie says these ASX 200 growth shares can rise 20% to 35%

Let's see what the broker is saying about these growing companies.

Read more »

Growth Shares

Why Zip shares and this ASX 200 stock are a buy according to this fund manager

These stocks could be leading contenders to deliver returns in the ASX 200.

Read more »

A man working in the stock exchange.
Growth Shares

Buy these 2 impressive ASX 300 shares in July: experts

Experts are bullish on these stocks.

Read more »

A young man sits at his desk working on his laptop with a big smile on his face.
Growth Shares

1 of the best ASX growth stocks to consider buying in July

I’m calling this stock one of the leading growth opportunities.

Read more »

a group of tech people gather around a computer operated by a young woman while the group looks on in support.
Growth Shares

3 of the best Australian stocks to buy and hold forever

These high-quality shares are rated as buys by brokers for a reason.

Read more »

$100 Australian notes on top of each other.
Growth Shares

Where to invest $10,000 into ASX shares in July

Analysts are raving about these shares. But why are they buys?

Read more »