Waiting for Webjet

Webjet reported strongly last week. Revenue up 29%, profit up 27%. Naturally, the share price (ahem) took off.

Webjet reported strongly last week. Revenue up 29%, profit up 27%. Naturally, the share price (ahem) took off.

They’re impressive numbers. The problem can also be expressed in numbers. A market capitalisation of near $1 billion dollars, against a net profit of $22 million. Long term growth estimates around 15% and a P/E around 50x gives a P/E to growth ratio above 3, when 1 – 1.5 is attractive. The Webjet story is compelling, but the share price is not.

The next round of growth may see Webjet *clears throat* come back to earth. Greater involvement of bricks and mortar and third party alliances may slow growth rates or reduce margins, or both. The trajectory remains positive, but the pace may slow.

Now check the chart. A huge gap followed the announcement and now a possible double top formation, rejecting the $10 level. Webjet is definitely on my radar (sorry) but I suspect I’ll get a chance to buy closer to $8.