Shares in easyJet (LSE:EZJ) have been falling for some time now. Over the past five years, the stock is down 73%, and since the start of the year, the easyJet share price has declined by 55%.
I don’t own easyJet shares in my portfolio. But if I’d invested in the stock at the start of the year, I’d be seeing the decline as great news.
The stock
If I’d invested £1,000 in easyJet stock at the start of the year, I’d have taken ownership of 164 shares. At today’s prices, I’d be able to sell that investment for £464.
Turning £1,000 into $464 isn’t a great investment result. But I don’t think this is the best way to think about investing or to measure the success of an investment.Â
As an investor, my aim isn’t to find stocks that I can buy now and sell for a profit after a few months. I don’t think that’s what investing is about.
Investing, as I see it, is about finding quality businesses that I can own and earn a return from as they produce more cash over time. It’s not about betting on a stock going up in the near future.
If I’d bought easyJet shares in January because I thought it would be a good investment, I’d be feeling great about things now. The falling share price would allow me to buy more shares at better prices.
Risks
As I see it, the underlying business hasn’t changed that much this year. I think that easyJet’s biggest issue is its debt and with rates rising, I see that as a significant concern.
But easyJet’s debt is nothing new – it’s the result of travel restrictions during the pandemic. If I wasn’t worried about the company’s debt in January, then I wouldn’t be worried about it now.
I might feel differently if I’d bought shares five years ago. £1,000 invested in October 2017 would have bought 94 shares. Today, I could sell that for around £264.
If I’d bought easyJet shares five years ago, I wouldn’t be worried about my investment because the share price has fallen. I might be worried by the decline in the underlying business, though.
The company’s long-term debt has increased by 243% and the number of shares outstanding has grown from 397m to 544m.
easyJet shares
To me, easyJet looks significantly different to how it did five years ago. So I can see that I might want to sell my investment if I’d bought shares in 2017 and the falling share price would give me a problem in that situation.
If I’d bought the stock at the start of this year, though, I’d see things differently. I don’t think the business has changed much since the start of the year, which would make this an opportunity for me to buy more shares at lower prices.