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£5k to spend on your ISA? A growth stock I’d buy in January to retire on

It’s been quite the week for Ryanair Holdings (LSE: RYA) and its investors. Fresh on the heels of upgrading its profit guidance in the past few days, reports emerged on Monday which, if true, could give its bottom line an extra bounce in the near-term. The possible imminent demise of rival Flybe.

According to Sky News, the low-budget carrier is engaged in emergency talks to secure extra financing and stave off collapse. The news follows the high-profile disintegration of Thomas Cook just last autumn, just one of several operators that have gone to the wall in recent times.

Another one bites the dust?

But, of course, it’s not bad news for the whole industry as others take advantage of the reduced competition. The fall of Thomas Cook, for instance, saw easyJet not only snap up its former rival’s slots at London Gatwick airport but launch its own package holidays businesses to fill a now-considerable space in the market too.

The struggles over at Flybe, which flies from around 80 airports across 15 European countries, could provide survivors like Ryanair with additional business opportunities on top of the obvious advantage in helping to lift air fares too. So expect these flyers’ share prices to rise should their domestic rival indeed sink without trace.

Plenty to celebrate

Things are already looking good for the Irish airline in particular. Ryanair on Friday upped its post-tax profit guidance for the current fiscal year (to March) to between €950m-€1.05bn from €800m-€900m. The decision was underpinned by “a stronger than expected Christmas and New Year travel period.”

It said forward bookings for the January-April period are up 1% from a year ago and, if a recent report from the International Air Transport Association is to be believed, Ryanair could continue to see bookings move higher in 2020 as the broader aviation market (particularly in Europe) improves.

City analysts certainly expect the flying ace to go from strength to strength over the medium term. Current consensus suggests a 5% earnings rise in fiscal 2020 will jump to 32% in the following period, estimates that are underpinned by Ryainair’s successful expansion programme. There were 9% more passengers on its planes in December versus the same month in 2018, a whopping 11.2m people using its services over the festive month.

Share price soars

It’s no wonder Ryanair’s share price has gone ‘gangbusters’ then. After rising 26% during the course of 2019, the low-cost operator has continued to charge at the start of the new year and it was last trading at 18-month peaks above €16 per share.

Things aren’t perfect for the operator of course, as competitive pressures continue to dampen air fares and turbulence in the Middle East threatens to push fuel costs still higher.

But I continue to believe Ryanair’s growing strength in an improving market still makes it a terrific buy right now and worthy of its slightly-toppy forward P/E ratio of 20.3 times.

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Royston Wild 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.