Jet2 (LSE:JET2) shares have surged 56% over the past two years, with most of this growth coming in recent months. And that means £10,000 invested in Jet2 shares back then would be worth £15,600 today. Clearly, that’s a market-beating return.
This strong performance largely reflects ongoing demand for leisure air travel. Despite economic uncertainties, consumers have continued to prioritise holidays, enabling Jet2 to increase its summer 2025 capacity by 8.3%, offering 18.6m seats and expanding into new bases such as Bournemouth and London Luton. As the country’s largest tour operator, it has been able to capture this demand.
Operationally, Jet2 has also exceeded expectations. For the year ending March 2025, pre-tax profits are forecast between £565m and £570m, representing a 9% increase from the previous year and hitting the upper end of guidance.
These results will be made available on 9 July.
In addition to strong operational performance, Jet2 stock surged because it simply got too cheap. Shortly after President Trump’s ‘Liberation Day’, Jet2’s market capitalisation was only about £200m above its net cash position (own cash plus deposits).
This implied that the market was effectively pricing the entire airline business at just six months’ worth of net income. This is a level of deep undervaluation rarely seen in profitable companies. Such a low valuation failed to reflect Jet2’s strong cash generation and growth prospects, making it an attractive target for investors once confidence returned.
Current valuation
Jet2’s valuation remains compelling even after the share price rally. At the last count, the company held a net cash position of approximately £2.1bn (including deposits), having steadily increased its net cash from £1.25bn in 2023 and £1.73bn in 2024, and is projected to reach £2.63bn by 2027.
The forward price-to-earnings ratio stands at 9.4 times for 2025, dropping to 8.6 times in 2026 and 7.9 times by 2027. On an enterprise value-to-EBITDA basis, Jet2 trades at just 2.23 times for 2025. That falls further to 1.73 times in 2026 and 1.24 times in 2027. This reflects a substantial discount to peers, highlighting the strength of its earnings and cash generation.
These metrics point to a business that, despite recent share price gains, is still valued attractively for investors seeking exposure to the recovering travel sector. While adding customer deposits to its own cash isn’t a perfect way to calculate a cash-adjusted valuation, I still believe the figures are indicative of a stock that can go higher.
The bottom line
A significant supportive trend for Jet2 has been the drop in jet fuel prices in 2025. Fuel is the airline’s largest operating expense, so lower prices have directly boosted margins and profitability. Many forecasts suggest that oil prices could go lower still in the latter part of the year.
Despite these positives, Jet2’s relatively thin margins make it vulnerable to sudden increases in costs or a downturn in travel demand. A spike in fuel prices or an economic slowdown could quickly pressure profits and weigh on the shares. This is a risk that investors need to bear in mind.
Nonetheless, it remains one of my largest holdings. I stocked up after Liberation Day and have enjoyed the upswing. If it wasn’t already a large part of my portfolio, I’d buy more and think it’s still worthy of consideration.
