After releasing its annual results today (3 May), Trainline (LSE: TRN) has a full head of steam. As I write this on Friday morning, the Trainline share price has put on 9% as the City digests the latest numbers from the ticketing company.
That means they have moved up 37% over the past year.
Over the past six weeks before today, they had been on a downward trend. In that period the price fell by over a fifth.
Could the results be a boost for the shares after the recent weak performance – and might they change my mind on investing?
First-class business performance
The company did well last year, explaining today’s jump. Annual revenues grew 21% to £397m. Operating cash flow soared over tenfold to £91m.
While the core UK market performed well, so did the international ticket sales business. Revenues in that division grew 17%, although at £53m they were roughly a quarter of the UK amount.
The strongest revenue growth of all — 23% — was delivered by the solutions business, which is essentially a platform Trainline provides for customers like corporate travel agents. With revenues of £135m, this is a sizeable operation.
Basic earnings per share jumped 61% to 7.3p, meaning the Trainline share price-to-earnings (P/E) ratio now sits at 45.
Clear line ahead?
I reckon Trainline can keep growing at speed.
It still has substantial scope to increase market share in the UK. In Continental Europe it is only really scratching the surface of most markets. Its established technology can help it build business there, as it is already proving in countries like Spain.
That said, I see some risks.
One is the previously mooted nationalisation of train ticketing in the UK. It may not happen any time soon (if at all) and even if it does, Trainline’s experience could mean it is actually as much of an opportunity as a threat for the company.
Another risk is the business model. Why should I pay Trainline a commission for a ticket when (in some cases) I can use its site or app to find the ticket then book it directly with a train company, avoiding commissions? Trainline noted today that it has an “increased focus on non-commission revenue generation.”
Second-class valuation
Another concern I have had about Trainline since the pandemic is what happens if travel mostly dries up for a sustained period of time.
That could see revenues hit the buffers. But unlike train operators, ticketing platforms are not high up a government’s list of essential service providers.
Yet if business momentum continues at its current high rate, I think the Trainline share price could pick up speed.
But the P/E ratio is higher than I am comfortable with. The valuation already looks a bit high for my tastes (just like a lot of train tickets) so I will not be getting on board.
