Ryanair Holdings (LSE: RYA) is a UK share I think could rise in value in the months and years ahead. Profits among leisure stocks are some of the fastest to rise when the economic cycle picks up. And I expect the earnings rebound across the travel sector to be particularly strong following on-and-off lockdowns since early 2020.
The British government’s so-called roadmap out of lockdown suggests that international travel could be back on by the middle of May. And this provides the likes of Ryanair with some much-needed light at the end of the tunnel following mass groundings due to Covid-19. Indeed, a news release from fellow London-quoted flyer easyJet today reveals the strength of underlying holidays demand.
The business said that flight bookings have leapt 337% since the roadmap announcement was made yesterday evening. Demand for package holidays is up more than 600% week-on-week too. But I particularly like Ryanair because it has one of the strongest balance sheets in the business. Consequently it will have the might to ramp up capacity quickly and extensively to meet the holidaymaker rush.
Buyer beware
There are a couple of concerns lingering at the back of my mind, though. Covid-19 lockdowns have enabled Europeans to build huge savings pots. This is helping to fuel the scramble for tickets that UK airline shares have recently reported. However, demand could tail off considerably further out if the continent suffers a prolonged Covid-19 economic hangover.
I’m also wary that the route out of the public health emergency is more promising on these shores that it is in the rest of Europe. Travel bans in and out of the UK might well be lifted in May. But restrictions might take longer to be rolled back elsewhere. Last week Germany stopped all incoming travel from the Czech Republic and parts of Austria, for example. Bumpy vaccine rollouts across the European Union could keep many of our continental cousins under strict lockdowns well into 2021.
A top UK recovery share
City analysts reckon Ryanair will recover strongly from expected losses of 78 euro cents per share in this financial year. The current fiscal period runs up to March 2021. Indeed, the number crunchers anticipate earnings of 32 cents in the upcoming period. And they expect earnings per share to soar to 151 cents in financial 2023.
There’s always the possibility that broker estimates could be blown off course for the reasons I mentioned above. It’s a scenario that could have a devastating impact on Ryanair’s share price given its high valuation. At current prices, the UK share trades on a price-to-earnings (P/E) ratio of 45 times for fiscal 2022.
That said, I still think the Dublin flyer is a very-attractive attractive UK-listed stock to buy today. And as a someone who buys shares with a long-term view, I reckon the battered aviation industry will provide Ryanair with some terrific acquisition opportunities to bolster profits growth in the years ahead. Id happily buy this leisure share for my own Stocks and Shares ISA today.