Is Thomas Cook Group plc A Better Buy Than easyJet plc, TUI Travel Ltd And International Consolidated Airlines Grp SA?

Which of these travel companies is the top pick? Thomas Cook Group plc (LON: TCG), easyJet plc (LON: EZJ), TUI Travel Ltd (LON: TT) and International Consolidated Airlines Grp SA (LON: IAG)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Shares in Thomas Cook (LSE: TCG) are up by 2% today after the travel operator announced that trading is in line with management expectations. In fact, Thomas Cook has sold nearly all of the winter season holidays it offers, as well as over half of summer season capacity. A major reason for this is strength in its UK operations, with demand from the UK being aided considerably by a fast-growing economy that is giving consumers the confidence to book holidays. This compares markedly to the situation in Europe, where Thomas Cook is finding trading conditions to be tough.

Growth Potential

Despite a challenging situation in Europe, Thomas Cook is forecast to increase its bottom line by an impressive 7% in the current year, followed by further growth of 27% next year. This shows that, while its future is largely dependent on the macroeconomic outlook, it continues to offer strong growth prospects on which it is clearly delivering. Furthermore, with shares in Thomas Cook trading on a price to earnings (P/E) ratio of just 12.2, it equates to a price to earnings growth (PEG) ratio of just 0.4. This indicates that growth is on offer at a very reasonable price, and that Thomas Cook could be due for a significant price rise over the medium term.

Sector Peers

Of course, Thomas Cook isn’t the only appealing travel stock in the FTSE 350. In fact, the likes of easyJet (LSE: EZJ), IAG (LSE: IAG) and TUI (LSE: TT) all have considerable potential. For example, easyJet is expected to increase its bottom line by 17% in the current year, and by a further 13% next year as it continues to benefit from an upsurge in demand from business passengers, as well as improving efficiencies. And, with a PEG ratio of 0.8, it offers growth at a reasonable price as well as greater stability in its earnings profile than Thomas Cook.

Meanwhile, IAG and TUI also offer the prospect of significant capital gains over the medium term. They trade on PEG ratios of just 0.3 and 0.6 respectively, which are hugely appealing and show that there is considerable potential within the travel sector. However, in both cases they offer less stability in earnings than easyJet, which means that even though they trade on more attractive valuations, easyJet still seems to be the pick of the sector, with it having increased net profit in each of the last five years. So, if you can only choose to buy one, then easyJet looks to be the most appealing buy of the four stocks.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Should I invest in the FTSE 100 – or try to beat it?

Our writer has the option of investing in a FTSE 100 tracker fund. So why does he choose to buy…

Read more »

Young black woman walking in Central London for shopping
Investing Articles

£1,500 to invest in a Stocks and Shares ISA? Here’s how I’d do it

Our writer has been investing in his Stocks and Shares ISA. Here he details how he could put £1,500 in…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

2 top FTSE 100 shares I’d buy before the market rebounds!

Christopher Ruane identifies a pair of FTSE 100 shares that have both tumbled in the past year and that he…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

Here’s why the next bull market may have already begun

The UK stock market has taken the Bank of England's interest rate hike in its stride and green shoots suggest…

Read more »

Gold medal
Investing Articles

No contest! Here’s my stock of the week

An update from this company offered some relief from the economic gloom. It's this Fool's stock of the week.

Read more »

Cogs turning against each other
Investing Articles

Scottish Mortgage shares are back on the rise: is now the time to jump onboard?

Scottish Mortgage shares have risen over 25% in the past 30 days. This Fool takes a look at why and…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Why do Lloyds shares seem so cheap?

Lloyds shares have been losing ground and now look cheap on some valuations. So why has our writer removed the…

Read more »

Investing Articles

How to invest in shares to help beat inflation

Soaring prices could well outstrip our investing returns this year. I think it's more important to find shares to beat…

Read more »