Ryanair (RYAAY, Financial)(RYAOF, Financial) is an Irish-based discount airline. The stock is reasonably priced and adding flights all the time. Ryanair is a holding of FPA International.
Ryanair Monday reported third-quarter revenues for the three months to the end of December of 1.34 billion euros ($1.42 billion), up 1% year on year. However, net profits fell by 8% to 95 million euros, and earnings per share fell 2% to 0.0760 euros.
The company has 1.3 billion shares, the stock trades for $15.32, and the market cap is $19.9 billion. Earnings per share are $1.05, and the price-earnings (P/E) ratio is 14.6. There is no dividend. Shares outstanding have decreased by about 100 million shares over the last five years. Fiscal 2017 guidance is $1.39 to $1.44 per share in earnings.
Revenues were $4.39 billion in 2012 and $6.63 billion over the trailing 12 months. Earnings per share grew from 39 cents to $1.05 over that time frame. Great growth. Operating margins are over 22% and return on equity over 28%.
The five-year average for free cash flow is $680 million. That would be a free cash flow yield of 3.4%. The balance sheet shows $3.386 billion in cash and $55 million in receivables. This is to $211 million in payables and $4 billion in debt. Very solvent.
As of the latest quarter, the average fare was $35.31. The company’s on-time arrival was 88% – very good. Fourth-quarter fuel is 95% hedged at approximately $56 a barrel; 85% of fiscal 2018 fuel is hedged at an average price of $49 a barrel. The company expects to carry 119 million passengers in fiscal 2017. Ryanair has 365 Boeing 737s. It will purchase 183 737-800s from fiscal 2015 to fiscal 2019 and 200 737s from fiscal 2020 to fiscal 2024; 9% of its fleet is leased.
I looked up a few flights on its web site. To fly from London to Eindhovenz, Holland, round trip was only $150. Cheap. It usually costs more than that in the U.S. I counted 33 countries on its web site including Malta, Morocco, Cyprus, Estonia and dozens of countries in Europe. It’s only a little over $300 to fly from London to Marrakesh in Morocco in March. There are add-ons like changing flights and charges for roomier seats. For $10.70, you can get a snack, drink and meal. The company recently added new flights to Israel.
Because much of Ryanair’s income is booked in pounds but reported in euros, Brexit has affected earnings. It expects average price per passenger to be down 15% in the next quarter. Management is also reviewing its two-bag policy. Many passengers are abusing the policy, and it is leading to flight delays.
Merrill Lynch advised clients to sell Ryanair shares, saying the rise of protectionism in Europe could stunt its ability to win market share. The company has a dumb rule stating that a certain percentage of shareholders must be European. The British shareholders may be excluded with Brexit.
Is the stock a buy? Maybe. It’s a typical value stock –Â reasonably priced, increasing revenues and earnings. It has very little debt. Most of the news points to new airports and countries being added all of the time.
Disclosure: We do not own shares.
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