It’s fair to say recent years haven’t been kind to investors in TUI (LSE:TUI) shares. The company operates in the global leisure and tourism sectors. Its business comprises airlines, cruises, tours, hotels, and resorts. As I write, the stock is the second-worst performer in the FTSE 250 index on a five-year basis.
I don’t own shares in the company, but if I’d invested £1,000 back in July 2018, how much would I have today? And can the holiday firm revive its ailing fortunes?
Let’s explore.
Five-year return
Five years ago, the TUI share price stood just shy of £49. Today, the stock is changing hands for a mere £5.63. That means it’s suffered a colossal 88.5% decline over the timeframe.
Undoubtedly, the pandemic was a considerable factor in accelerating the fall in TUI shares. Travel restrictions suppressed demand, but the stock was already in a downtrend before the arrival of Covid-19.
Concerning numbers and weakness in the company’s balance sheet have quashed recovery hopes in the post-pandemic trading environment.
In July 2018, I could have bought 21 shares for a grand total of £1,028.58. Fast-forwarding to the present day, my shareholding would have shrunk in value to just £124.53. Ouch!
The group hasn’t paid a dividend since 2020. However, I would have a little passive income to add from the pre-pandemic period to soften the blow slightly. Including dividends, I’d be left with £147.12 today.
The next destination
The German-headquartered company delivered a mixed set of financial results for the first half of FY23. Losses totalled €242.4m. This figure is an improvement on last year’s €329.9m loss for the same period, but it was slightly worse than City analysts anticipated.
TUI could perform well over the crucial summer period. Around 2.4m customers booked holidays in Q2, which represents a year-on-year increase of 600,000. However, bookings haven’t quite recovered to pre-pandemic levels yet.
In addition, the firm can now repay the German government in full for the state aid it received to survive the pandemic, thanks to a €1.8bn discounted share issue. Nonetheless, I think it’s too early to say the company is out of the woods just yet.
Net debt remains uncomfortably high. Plus, the performance of its cruise division continues to lag tours and hotels, which have both experienced a stronger recovery.
Should investors buy?
If investors are considering adding TUI shares to their portfolios, today’s price could be a potential bargain. The stock is trading near a five-year low and there are some causes for optimism with early signs that the green shoots of recovery are beginning to emerge.
However, I’m not rushing to buy the stock just yet. The company is still making big losses and the fact that bookings haven’t recovered to where they were in 2019 is a major concern.
New flight routes for 2024 from a range of UK airports, including Gatwick, Stansted, Manchester, and Glasgow, could improve the long-term outlook for share price growth. But, at present, I think the stock carries too much risk for me.
I’ll closely monitor the next set of results for clear signs of improvement and re-appraise the stock’s investment prospects at that point.
