Are National Express shares one of the best travel stocks to buy?

Jabran Khan wants to know if National Express shares could be a good travel stock to add to his holdings to help diversify his portfolio.

| 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.

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

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

I am looking to diversify my portfolio and have been reviewing travel stocks recently. One stock I am currently interested in is National Express (LSE:NEX). Could the shares be a shrewd addition to my holdings? Let’s take a closer look.

Helping people travel

As a quick reminder, National Express is a bus, train, light rail, express coach, and airport services travel provider based in the UK. It also has international operations in the US and Australia.

So what’s happening with National Express shares currently? Well, as I write, they’re trading for 186p. At this time last year, the stock was trading for 270p, which is a 31% decline over a 12-month period. It is worth noting that many travel stocks have seen their share prices struggle since the pandemic.

The bull and bear case

Firstly, I believe that National Express has a distinct advantage over many of its competitors in the travel sector. Its large size, coupled with its geographical footprint, is advantageous. Next, due to its profile and presence, it often wins lucrative contracts, which is positive for me as a potential investor. Contractual agreements usually offer stable revenue streams.

When the pandemic struck, National Express shares suffered badly. Demand for public transport dwindled and 2020 performance was reflected in this too. Revenue and profit levels dropped in 2020, after previous years of growth. The good news is that 2021 performance surpassed 2020, which means the business is on the right track once more. I am keen to see 2022 performance but in terms of looking back, I do understand past performance is not a guarantee of the future.

Next, at current levels, National Express shares look good value for money on a price-to-earnings ratio of just six. This tells me they could be excellent value to buy now and hold on to for the long term for growth and eventual returns.

National Express must navigate some serious headwinds currently, however. Soaring inflation, coupled with rising costs have placed real pressure on operations, performance, and returns. Profit margins are being squeezed by rising costs such as for fuel.

Finally, there have been talks of strikes across the travel sector in recent months, especially here in the UK where some have taken place. This could affect performance and returns, as well as investor sentiment for National Express.

My verdict

Overall, I would buy National Express shares for my holdings. I am buoyed by its profile, presence, and its past track record. The shares also look too good to miss on current levels.

I am not concerned by the current headwinds, and don’t foresee these as longer-term issues. In fact, the current cost-of-living crisis could be beneficial for National Express shares. This is because cheaper, low-cost travel options will increase in demand for consumers. This could boost performance and returns upwards.

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.

Jabran Khan 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

Investing Articles

Up 14% in 2024, what’s next for the Lloyds share price?

This Fool takes a closer look at what prompted the Lloyds share price to rise this year, and offers her…

Read more »

Investing Articles

5 FTSE 100 stocks to consider for a lifetime of passive income

I see lots of cheap dividend stocks in the FTSE 100 right now, but prices are starting to rise. Here's…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

3 growth stocks I’m desperate to buy as the FTSE 100 dips

Never waste a dip, says Harvey Jones. Three of his favourite growth stocks have fallen over the last month and…

Read more »

Investing Articles

I’d use a £10K ISA to try and generate £900 in dividends annually like this!

Christopher Ruane explains how he would invest a Stocks and Shares ISA in blue-chip companies to try and set up…

Read more »

Investing Articles

Here’s how I’d build a second income stream worth £1,228 a month by investing £10 a day!

A second income stream could come in handy later in life. This Fool explains how she’d build one by investing…

Read more »

Investing Articles

5 FTSE 250 stocks I’d buy for a lifetime of passive income

Here's why I think the FTSE 250 could be the best UK stock market index to go for in 2024…

Read more »

Union Jack flag triangular bunting hanging in a street
Investing Articles

Buy cheap FTSE shares, says HSBC

Analysts at HSBC have upgraded their rating of FTSE stocks and reckon the blue-chip UK index could carry on powering…

Read more »

Couple working from home while daughter watches video on smartphone with headphones on
Investing Articles

It could be worth buying the dip for this FTSE 250 stock, down 7% today

Jon Smith spots a sharp drop in a FTSE 250 stock but explains why this could just be a blip…

Read more »