Why I think this FTSE 250 tech share could be a long-term growth stock

Jabran Khan explores this tech stock and how its performance can make it a sound investment for your portfolio.

| 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.

If you look back as recently as 20 years ago, people booked planes, trains, and coach tickets through local agents or in person at the station. The strength and evolution of technology ultimately led to people being able to book pretty much any mode of transport on tailor-made websites and apps. 

Trainline (LSE:TRN) is a provider of such sites, and offers a one-stop shop for booking trains and coaches across the country and now further afield into Europe.

Origins and rise

Trainline was established in 1999 by Virgin Group UK, and Stagecoach purchased a 49% shareholding in the company a short time later. Trainline proceeded to swallow up its main competitor, Qjump, in 2004. Stagecoach sold up and Trainline was then owned by Virgin Group (86%) and National Express (14%). 

As well as selling tickets directly to customers using its own brands, Trainline also provides website services to eight out of the 20 UK train operating companies who sell the tickets under their own brand. As of June 2019, Trainline comfortably boasted 80 million visitors per month to its websites, resulting in 100,000 tickets sold every day – one every three seconds – for 44 train companies across 24 European countries. All this before its IPO.

IPO and subsequent performance

In January 2015, the sale of Trainline to KKR was announced. KKR decided to take the plunge and undertake an IPO in June 2019, which turned out to be a highly successful move. The initial shares of the tech travel phenomenon were offered at 350pp and rose 18% by the end of the first day’s trading. 

Trainline has enjoyed solid performance, and the share price is climbing regularly. Its international division performed particularly strongly in the six months to 31 August 2019, with revenue up 99% to £14m. This is particularly promising as Trainline looks to diversify from its core UK market.

One must note, however, that in the six months to 31 August 2019, the firm reported a £89m loss after tax, compared to an £11m loss the prior year. Trainline attributed the loss mostly to the costs of its IPO.

According to head of research at Megabuyte, Lee Prout, the future for Trainline is a positive one. He commented, “With the majority of tickets for travel still being bought offline and Trainline the clear digital enabler the future looks very bright for the company.”

Next steps

Trainline is aiming to exploit the increasing digitalisation of rail and coach ticketing across Europe, as well as at further international expansion. Rail travel is also expected to increase in the coming decades as lower-carbon transport becomes a priority.

I believe this could be a good earner as part of your portfolio. The tech travel sector is still a relatively new one. and Trainline’s position within it is a prominent one. To put this into context, from the IPO in June 2019 to the time of writing, there has been an increase of over 50% in the share price. I expect this to get better as time goes on.

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.

Jabran Khan 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

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

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

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »