Save from as low as €40 per month Change modify pause
We increased the price target on Ryanair from €18 to €20. The increase in price target is based on an increase in PE from 15x to 16x. The shares are trading on a PE of 18x.
Ryanair posted results last week. Management believes the business is performing ‘very well’, stressing continued cost discipline and an expanding pipeline of airport growth opportunities which is causing the company to look at raising its growth rate.
NB: Make sure you buy the stock trading on the London exchange rather than Dublin due to lower stamp duty costs. London (0.5%), Dublin (1%).
About the Company
Ryanair is headquartered in Swords, a suburb of Dublin, Ireland, with its primary operational bases at Dublin and London Stansted Airports. In 2016, Ryanair was the largest European airline by scheduled passengers flown, and carried more international passengers than any other airline.
Valuation
With consensus earnings per share expected to come in at €1.22 in 2018 and using a PE multiple of 16x, we expect the price of Ryanair shares to move towards the €20 level. This means a potential 7% capital upside. I would also like to stress that an EPS of €1.22 conservative considering the outlook of this Company. If you look at what other analysts are saying (e.g. Barclays) they are forecasting earnings of €1.32/ share which would result in a Price Target of €21.
Investment Rationale
Other;
Concerns
On the labour front, there is the possibility that an EU ruling later this year requires employees to pay personal taxes in their local countries, rather than Ireland, but Ryanair does not see this as a concern.
Conclusion
Ryanair's strategic transformation may have already doubled its profitability and share price but we believe the best is yet to come. Positive economic growth, potential to increase prices and market share will all contribute to increased margins going forward. We believe Ryanair should form part of a well-diversified portfolio.
You are signing up to receive news, updates, general market announcement, articles and product or service marketing. By signing up you are consenting to our privacy policy and can unsubscribe at any time.