Tui AG isn’t the only growth stock that could make you a millionaire

This company could deliver high returns alongside Tui AG (LON :TUI).

| 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.

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.

The first quarter update released by the world’s largest travel group Tui (LSE: TUI) on Tuesday showed that it continues to offer significant upside potential. The company has experienced a number of significant changes in recent years and has had to cope with difficult trading conditions at times. However, it now seems to be in a position to deliver high total returns.

Strong performance

Tui was able to increase its turnover by 9% in the first quarter of the year. Its EBITA (earnings before interest, tax and amortisation) also improved, standing at a loss of €25m versus a loss of €60m in the same quarter of the previous year. This was due to the continued development of the company’s strategy, with its Sales & Marketing division performing well.

The business also benefitted from improving trading conditions. In prior years there had been a disappointing level of demand across the industry, with risks such as terrorism as well as economic uncertainty causing many consumers to seek other options. However, in recent months there has been a pick-up in demand, with this proving to be a positive catalyst on the company’s financial performance.

Upbeat outlook

Looking ahead, Tui is forecast to grow its bottom line by 10% in the current year, followed by further growth of 12% next year. This suggests that there is scope for an improvement in investor sentiment – especially since the stock trades on a price-to-earnings growth (PEG) ratio of just 1. This indicates that there is still a discount to the company’s intrinsic value being priced in by the market following a period of subdued demand.

In addition to strong capital growth prospects, the company also has impressive income potential. Tui has a dividend yield of around 3.9% at the present time. With dividends due to rise by over 10% next year, the stock could generate high total returns in the medium term.

Sector peer

Of course, there are other travel and leisure stocks that could boost your portfolio performance. One prime example is Eastern Europe-focused budget airline Wizz Air (LSE: WIZZ). It has enjoyed rapid growth in recent years and has been able to expand its operations to include a variety of routes and destinations.

This is expected to lead to strong earnings growth over the next couple of years. For example, Wizz Air is forecast to post a rise in its bottom line of 24% in the current year, followed by growth of 19% next year and 20% the year after. Despite such a rapid rate of growth, the stock trades on a PEG ratio of just 0.6 at the present time.

Certainly, Wizz Air’s business model is highly cyclical. Demand for its services could decline in a short space of time. But with a wide margin of safety it appears to offer a favourable risk/reward ratio for the long term. As such, now could be the right time to buy it.

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.

Peter Stephens has no position in any 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.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »