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Why I’d buy this phenomenal stock, up 450% over five years

There’s been amazing progress with the share price of Dart (LSE: DTG) over the past five years – at today’s 1,228p it’s up more than 450% over the period. But where will it be five years from now?

Well, I wouldn’t bet against the stock, and I reckon the underlying growth trajectory of the business looks set to continue. To me, Dart looks like a decent candidate for a buy-and-hold strategy, and I don’t often say that about a company that runs an airline!

Good figures

The firm describes itself as a “Leisure Travel and Distribution & Logistics Group,” but a glance at today’s half-year results report reveals to us that in the six months to 30 September, more than 99% of pre-tax profit came from the Leisure and Travel division with just 0.8% from Distribution and Logistics. And the big trading brands behind the company’s success are its airline,, and its tour operator Jet2holidays.

The share price looks perky today, with the financial figures revealing a satisfactory outcome at half-time. Revenue rose 16% compared to the equivalent period the year before and earnings per share drifted up 2%. And the directors seem bullish about the outlook because they pushed up the interim dividend by 7%.

The company said in today’s report that the “modest” increase in overall profits “reflected a later customer booking pattern” in the Leisure Travel business. Demand from customers strengthened through the summer season. However, there’ll likely be losses in the second half “as is typical for the business.”

But ongoing investment in growth seems assured and the company has plans for more flying programme expansion at “several” of its UK operating bases in the summer 2020 season.

Meanwhile, leisure travel bookings are continuing to strengthen.” That’s great news, and in music to the ears of shareholders, the directors said they now expect full-year profit to “significantly exceed” the prior year’s outcome.

Potential turbulence ahead

However, airlines can make disastrous investments if we aren’t careful! And the directors offered a few grounding words in the report to stop as getting carried away with Dart’s growth prospects.

They said it’s unclear whether the buoyant demand will continue in the medium term and the outcome of the Brexit process has the potential to throw a spanner in the works if it goes badly.

On top of that, they sounded a general warning that the travel industry is exposed to cost pressures via fuel, foreign exchange, carbon and other operating charges. There’s also a big demand for ongoing investment in products and operations, “including that required to attract and retain colleagues.”

Indeed, headwinds can blow fiercely for a cyclical sector such as the travel industry, and I reckon a storm could appear at any time capable of destroying profits for Dart.

Yet the company is focused on growing the business in the years ahead. And we can pick up a few of the shares on a forward-looking earnings multiple of just under 15 for the trading year to March 2021.

I like the stock and it’s going on my watch list with a view to buying on dips and down-days.

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Kevin Godbold has no position in any share 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.