These high-flying growth stocks could soar even higher

The shares might be down but Paul Summers remains fairly bullish on the prospects for both of these travel stocks.

| 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.

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.

If you’d had the courage to buy shares in £985m cap travel, logistics and distribution firm Dart Group (LSE: DTG) last November you would have seen your capital double in value over the last nine months. 

Don’t kick yourself if you didn’t make that purchase. Based on today’s final results (and despite the market’s initial reaction to them), I still think the shares have further to climb. 

Over the year to the end of March, group revenue jumped 23% to £1.73bn. Thanks to strong demand last summer and heavier price discounting in H2, overall revenue at its leisure travel business rose 24% to £1.57bn. Dart’s airline,, carried over 7m passengers to holiday destinations in 2016 — a 17% increase on the previous year. There was also a 42% rise in the number of customers buying package holidays from the company. Revenue at its Distribution and Logistics arm rose 14% to £163.5m. 

So, why on earth are shares trading 12% lower this morning?

A lot of this will be down to the fall in pre-tax profits. These flew 14% lower to just over £90m following “considerable investment” in the company’s two new operating bases at Birmingham and London Stansted Airports and a £10.9m charge for foreign exchange revaluation losses. The £900,000 fall in profit at its Logistics arm (to £4.5m) was blamed on a hugely competitive market and a £400,000 bad debt write-off after one customer went into administration.

Despite all this, Dart stated that both of its businesses had made “satisfactory starts” to the 2017/18 financial year and that it was confident of meeting profit expectations, particularly as the new bases should allow it to strengthen its position in the Midlands and attract new customers from London and the East of England. Concerns over Brexit aside, the additional investment undertaken by the company (which also includes the purchase of new and mid-life aircraft and an extension to its Teynham distribution centre) should also pay off over the longer term.

At 13 times trailing earnings, boasting a huge net cash position (£168.5m) and excellent levels of free cashflow, Dart still looks worthy of investment. Today’s sell-off smacks of market impatience, a degree of profit-taking and unchecked expectations. 

Whizzing higher

For evidence that it might be best for private investors to ignore any short-term reaction from the market, look no further than Wizz Air (LSE: WIZZ). After dropping as low as 1,560p following February’s Q3 profit warning, shares have rebounded strongly to now trade at 2,553p. That’s a 44% return in just five months. 

At 14 times forecast earnings and despite recent gains, shares in Wizz still offer reasonable value, in my opinion. The company’s recent decision to set up camp at Luton Airport (also home to sector peer and FTSE 100 constituent, easyJet) can be taken as a clear statement of intent by management that it won’t be held back by concerns over the impact of Brexit on the European aviation industry.

Elsewhere, the £1.9bn cap’s finances continue to look in excellent shape. It’s got stacks of cash and no debt. What’s more, the returns Wizz manages to generate on the money it invests tend to be far higher than most of its peers.

With Q1 results expected next Wednesday, I wouldn’t be surprised if the stock climbs further over the next month or so, assuming there are no nasty surprises awaiting investors.

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 assessed. Consider taking independent financial advice.

Paul Summers has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

A brilliantly reliable FTSE 100 share I plan to never sell!

This FTSE-quoted share has raised dividends for more than 30 years on the spin! Here's why I plan to hold…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

This 7.7% yielding FTSE 250 stock is up 24% in a year! Have I missed the boat?

When a stock surges, sometimes it can be too late to buy shares and capitalise. Is that the case with…

Read more »

Investing Articles

£13,200 invested in this defensive stock bags me £1K of passive income!

Building a passive income stream is possible and this Fool breaks down one investment in a single stock that could…

Read more »

Investing Articles

I think the Rolls-Royce dividend is coming back – but when?

The Rolls-Royce dividend disappeared in 2020 and has not come back. But with the company performance improving, might it reappear?

Read more »

British Pennies on a Pound Note
Investing Articles

Should I snap up this penny share in March?

Our writer is considering penny shares to buy for his portfolio next month. Does this mining company merit a place…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Stock market bubble – or start of a bull run?

Christopher Ruane considers whether the surging NVIDIA share price could be symptomatic of a wider stock market bubble forming.

Read more »

Investing Articles

Buying 8,254 Aviva shares in an empty ISA would give me a £1,370 income in year one

Harvey Jones is tempted to add Aviva shares to his Stocks and Shares ISA this year. Today’s 7.37% yield isn't…

Read more »

Investing Articles

Is the tide turning for bank shares?

Bank shares are trading on stubbornly cheap-looking valuations yet business performance in the sector is broadly robust. Should our writer…

Read more »