How much higher can the Webjet (WEB ASX) share price go from here?

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The Webjet Limited (ASX:WEB) share price jumped an amazing 18 per cent higher on the day they reported record profits for the year ended 30 June 2018.

Since then, the Webjet share price went on to hit an all-time high of $17.93, before settling back down to now trade around the $17 mark.

WEB shares have had a great 12 months, jumping almost 50 per cent higher, soundly out-performing the 9.3 per cent gain in the ASX 200 index over the same period.

I was lucky enough to buy Webjet shares in June 2014 when they were trading around $2.50. At the time they were trading on a fully franked dividend yield of around 5 per cent, madness for a full blown growth stock, albeit one that was going through a temporary flat patch.

I’m up almost 600 per cent on my June 2014 purchase of Webjet shares.

ASX:WEB

Source: The Capital Club — click here to view the full WEB share price chart

I’ve also added to my holding on the way up when the company has raised additional money. I’ve received some nice dividend cheques along the way. And I’ve not sold any of that holding. Not surprisingly, Webjet share are now one of my largest positions.

Where to from here for Webjet shares?

Last month Webjet reported sales increased 54 per cent and net profits jumped 63 per cent higher to $55.7 million. Earnings per share jumped 38 per cent higher to 48.4 cents per share, and Webjet increased its full year fully franked dividend by 14 per cent to 20 cents per share.

Looking ahead, Webjet said trading in July was strong, with the company reiterating its bookings growth targets of more than 3 times the underlying market for B2C and more than 5 times the underlying market for B2B.

At around $17, WEB shares trade on a price to earnings ratio (P/E) of around 35 times and a fully franked dividend yield of 1.2 per cent. These days, clearly Webjet is no longer a dividend share.

Although Webjet shares don’t look particularly cheap, nor are they ‘off the charts’ expensive when compared to their growth rate.

As the company gets bigger, it becomes harder for them to grow at the same pace.

Still, management believes the company is well positioned and has substantial headroom for ongoing bookings growth as the B2C market continues to shift online. It sees significant growth opportunities in Packages and intends to continue improving its ancillary offerings to meet growing customer demand for a wider choice of travel products.

Webjet shares likely to pause for breath

Webjet has some solid tailwinds, but given its valuation, I wouldn’t be necessarily expecting the WEB share price to go much higher from here before the company’s next trading update, due at its 21 November 2018 AGM.

Webjet Limited shares are a member of The Capital Club 10, a basket of ASX stocks I think have a good chance of out-performing the S&P/ASX 200 Index over the next three years. The WEB share price is up more than 40 per cent since the basket was first published, making them the top performer on the list.

Webjet shares don’t look cheap, but these 3 shares do…

Combining countless hours of research with over 30 years of hands-on stock market investing experience, The Capital Club’s founder Bruce Jackson has just published his definitive list of 3 Cheap and Good ASX Stocks for 2018.

Webjet was not one of them, but the list does include one tiny gold mining stock, and the company one top fund manager calls the cheapest stock in the ASX 100.

Find out why these 3 Cheap and Good Stocks could be better buys than Webjet. But you better hurry… these stocks may not stay cheap for long.

See the 3 stocks

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Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au