With 2020 almost upon us, it’s time to start looking for new investments that will help us to meet our goals for the next year and beyond.
New year, new investments!
Wizz Air is a Central and Eastern Europe (CEE)-based, low-cost airline, covering over 150 destinations across more than 40 countries. The airline benefits from having the lowest cost base in the European industry, from having a young fleet of efficient modern aircraft, and also from focusing on the fast-growing CEE market.
This is reflected in its financial performance, where annual revenues have increased by an average of more than 17%, over the last four years. Top-line growth has also fed through to the bottom line, with net profits up by 61% in four years, to €295m last year.
The airline continues to make progress, with passenger growth of 17% in the year to the end of November. What’s more, this trend could be strengthening: year-on-year passenger growth was above 21% in both October and November.
The load factor – showing the percentage of an airline’s seats that are filled – also points to the fact that Wizz is a highly efficient operator. A load factor of nearly 94% for the last 12 months is among the best in the world.
Wizz’s success hasn’t been missed by the market. The shares are up by 40% so far in 2019. But I think there is still more to come. The shares still trade at only around 13 times last year’s earnings.
Considering the airline’s track record of growing revenues and profits, and company guidance of profit growth of at least 14% this year, I think these shares are a must-buy for 2020 and beyond. In fact, I’ve already bought mine.
Another growing, global business that has captured my attention is Stock Spirits. Like Wizz, Stock is also focused on the growing CEE market, and is one of the leading branded spirits businesses in the region.
Vodka sales make up half of the group’s sales volume, but it also owns multiple brands across whisky, rum and wine. Interestingly Poland – Stock’s largest market where it has a 29% market share – is the third largest Vodka market in the world and the largest in Europe.
The group is increasingly adopting a strategy of ‘premiumisation’, with 30% of the group’s sales now coming from its premium products. This is a shrewd move, with sales of premium vodka in the CEE region registering double-digit growth, in each of the last five years.
Stock is also looking to grow through acquisition, spending €30m in the last year, buying an Italian producer of premium grappa and sparkling wine, and also a high-end spirits business in Czech Republic (where Stock is already the market leader).
Revenue rose by 9% in the last year, while adjusted EBIT rose by 6%. This was helped by revenue growth of over 10% in its two main markets, Poland and Czech Republic.
I think a P/E ratio of around 16 and a dividend yield of nearly 4% make this stock attractive, putting it at the top of my watchlist. I also believe that its stable of premium brands makes it a possible takeover target for the larger drinks companies.
Thomas owns shares of Wizz Air Holdings. The Motley Fool UK has recommended Wizz Air Holdings. 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.