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No-frills carrier easyJet remains a buy as the rise and rise of its shares shows no sign of stopping.
The rise and rise of easyJet shares shows no sign of stopping, with the group revealing last week that it flew more than 60m passengers in the year to March for the first time.
In May, the number of passengers carried on its aircraft jumped 3.4pc to 5.6m, bringing the number of passengers transported in the year to May to 60.05m. The load factor, a measure of how full the airline’s planes were over the month, rose 10 basis points to 88.1pc.
All of this bodes well for the company meeting analysts’ expectations of earnings growth of more than a third this year. Indeed, the recent acquisition of 25 pairs of arrival and departure slots at Gatwick airport from Flybe looks set to increase profit further.
The airline paid £20m for the slots, with an analysis by broker Liberum suggesting that each slot pair can generate about £1m of operating profit a year, which would boost earnings by around 5pc.
It is also possible that the group will buy more aircraft to try to steal more market share from Europe’s flag carriers – especially business travellers. Carolyn McCall, the group’s chief executive, recently argued the case for increasing its fleet, despite opposition from its largest shareholder, Sir Stelios Haji-Ioannou.
Sir Stelios has argued that a large purchase of aeroplanes would be a “vanity exercise” that would be a drag on the group’s profitability.
Questor has had a hold rating on the shares for some time – and they have continued to fly higher and higher. The earnings multiple of 14.5, falling to 13, does not look overstretched for a growth business and the yield is 2.1pc with plenty of scope to increase. The shares are once again a buy.