Low-cost airline Wizz Air (LSE: WIZZ) might not have been a public company for long, but since its IPO in 2015, the stock has smashed the broader market.
Investors who were willing to take a position when it hit the market have seen the value of their investment rise by more than 215%. This performance means the company isn’t only one of the best performing airline stocks in Europe, but it’s one of the best-performing stocks in the FTSE 250 as well.
And it doesn’t look as if growth is going to slow anytime soon.
Tough market
Wizz’s performance over the past five years is all the more impressive considering the brutal nature of the airline industry. Historically, airlines in general have been a pretty poor investment. These companies tend to have high fixed costs and no control over other variable costs such as aviation fuel.
At the same time, ticket prices can be volatile, and most airlines have little to no pricing power. Consumers only really care about price when booking plane tickets. Wizz’s whole business model is built around this mentality.
It’s focused on being the cheapest and most efficient airline in Europe and these efforts are certainly paying off. While the firm’s offering to customers is relatively primary, for short-haul flights that’s all customers want. The airline’s growth confirms this.
Growing footprint
Recent trading updates show that its growth is still accelerating. Over the 12 months to the end of January, the number of passengers flying with the airline increased 18.6% year-on-year. The airline’s load factor, which describes how full each plane was during the period under review, rose 1.3%, to 93.7% on average.
These figures are even more impressive considering the company increased the number of seats available by 17%. Amazingly, Wizz also added a total of 18 new routes around Europe last month, underpinning its presence as continent’s fastest-growing low-cost operator.
The company also claims to be the greenest airline in Europe. It says it continuously operates at the lowest CO2 emissions per passenger kilometre among all competitor airlines. CO2 emissions per passenger kilometre declined to 57.3g over the 12 months to the end of January. That’s down from 58.9g in the previous period.
Doubling revenues
Management believes the company’s growth is only going to accelerate. The group is planning to increase its fleet by around 22% over the next two years. This should enable Wizz to maintain revenue growth of 15-20% per annum, according to a recent management presentation.
At this rate, the company’s revenue will double over the next three-to-four years. Assuming everything else remains equal, this implies the stock price could double from current levels.
As such, now could be a great time to snap up a share in this low-cost European airline as the stock prepares for takeoff over the next few years.