Should I buy this FTSE 250 stock as it soars back to the FTSE 100?

This FTSE 250 stock has rallied following its pandemic woes. This Fool thinks now could be a good time to buy it for his portfolio.

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With some spare cash from February, I’m on the hunt for new additions to my portfolio. I like the look of FTSE 250 stock easyJet (LSE: EZJ).

The company has been through a lot in the past few years. It fell out of the FTSE 100 during the pandemic. But it has made a strong recovery from its 2020 lows.

In the last six months, it has risen an impressive 26.4%. With that, in February it was reported the airline giant will return to the UK-leading index in its next reshuffle.

I considered snapping up some shares back in 2020 but ultimately opted against it. Should I now? And what’s in store for easyJet going forward?

Primed for take-off?

The business looks like it’s in a good position to thrive in the months to come. Budget airlines have excelled in recent times. That’s because passengers are eager to make up for the travel they missed out on during lockdowns. For Q1 2024, passenger growth jumped 14% year on year. Its revenue also climbed a healthy 6%.

It’s expected that European airlines are in for an excellent summer period. According to travel data company OAG, European airlines will have 817.5m seats available between April and October. That’s the highest number on record.

As part of this, easyJet says it has been filling two planes a minute during its busiest booking periods in 2024. It has already signalled a strong summer, with seats sold ahead of last year’s figures.

Holidays service

The growth of easyJet holidays is also something I like to see. This part of the business offers customers the chance to book cheap package deals with low deposits. It delivered £30m in profit for Q1, £17m more than last year.

With the cost-of-living crisis ongoing, I’d expect to see more growth in the division as it continues to rise in popularity.

Large volatility

That said, easyJet shareholders may be in for a bumpy ride largely due to travel disruptions. It took a £40m hit as a direct impact from the conflict we’ve seen in the Middle East. Any further troubles going forward could impact the business.

That’s just one example of the volatile nature of the airline industry, which is another concern of mine. A lot of what dictates easyJet’s share price is outside of its control.

Conflict is one example. But there are other factors too, such as fluctuating oil prices. Buying the stock potentially means I’ll have to be happy with some turbulence in my investment.

Time to buy?

Even so, it looks like easyJet could be a smart buy today for the long haul. Trading on 12.8 times earnings, with that falling to 8.8 on forecast 2024 earnings, I’d be getting good value for my money.

The budget operator has made a strong recovery. This will only accelerate when interest rates are cut, and spending picks up. I’m also hopeful of a rising dividend over the next few years.

I think its recent promotion to the FTSE 100 is a sign of the good things to come. If I had the spare cash, I’d buy the stock.

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.

Charlie Keough has no position in any of the 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.

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