Down over 70% in 5 years, will the TUI share price ever recover?

The last few years have been bumpy for the travel sector. But with the TUI share price still down substantially, is there hope for a recovery?

| 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.

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.

In the turbulent world of travel and tourism, few companies have experienced as dramatic a rollercoaster ride as TUI (LSE:TUI). Once a titan of the industry, the TUI share price has plummeted 73% in the past five years, leaving investors wondering if this fallen giant can ever reclaim its former glory.

What went wrong?

TUI’s a global tourism group headquartered in Germany. From luxurious resorts to cruise ships and package holidays, TUI has its fingers in virtually every pie of the tourism sector. But despite its diversified portfolio, the company’s struggled in recent years.

The numbers paint a stark picture. The TUI share price now sits below €7, a far cry from its heady highs of just a few years ago. Yet, amid this gloomy backdrop, I think there are still a few glimmers of hope that might signal a potential turnaround.

Should you invest £1,000 in Aviva right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Aviva made the list?

See the 6 stocks

Some areas of optimism

First, let’s address the elephant in the room — profitability. After years of losses, the firm has finally climbed back into the black. Management reported earnings of €509.40m over the trailing 12 months, translating to an earnings per share (EPS) of €1. This return to profitability is a crucial first step on the road to recovery.

Moreover, TUI’s valuation metrics are starting to look intriguing. The company’s currently trading at a price-to-earnings (P/E) ratio of 6.6 times, significantly below many of its peers in the hospitality industry. This suggests TUI might be undervalued, especially considering its brand recognition and market position.

But perhaps the most tantalising metric for potential investors is this. According to a discounted cash flow calculation (DCF), the shares are currently trading at a whopping 47.8% below the estimate of fair value. If this assessment proves accurate, it could mean substantial potential for those willing to weather the turbulence.

Looking ahead, the forecast appears cautiously optimistic. Earnings are projected to grow by 15.23% a year, a respectable clip that could help fuel a share price recovery. However, it’s worth noting that the firm operates in a highly cyclical and volatile industry, subject to external shocks ranging from geopolitical events to public health crises.

Plenty of challenges remain

One significant challenge facing TUI is its debt burden. With a debt-to-equity ratio of 166.2%, the company’s carrying a hefty load that could hamper its ability to invest in growth initiatives or weather future storms. Management’s ability to navigate this high debt level will be crucial to TUI’s long-term recovery prospects.

So will the TUI share price ever recover to its former highs? The honest answer is, it’s complicated. The company’s made significant strides, returning to profitability and showing signs of undervaluation. However, the path to full recovery is fraught with challenges, from high debt levels to the inherent volatility of the tourism industry.

Those with a strong stomach for volatility and a belief in the long-term resilience of global tourism might see an opportunity. However, I feel TUI’s journey back to its glory days will likely be a marathon, not a sprint.

I’ll be putting my money to work elsewhere for now.

Should you buy Aviva shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy now

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.

Gordon Best 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

4 REITs Fools own for passive income

REITs often have higher-than-average dividend yields compared to other stocks, making them a solid choice to consider for passive income…

Read more »

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »