Shares of On the Beach Group (LSE:OTB) rose 14.5% in early trading after the travel company reported record-breaking customer volumes and strong financial results for the year ending September 30.
Summer 2024 passenger numbers were up 13% from the previous year, with winter bookings rising 25% year-on-year.
The surge was partially credited to OTB’s partnership with Ryanair, which began in May.
The partnership, described by CEO Shaun Morton as a model for industry collaboration, enhanced the customer experience for Ryanair flight bookings and expanded OTB’s market with new offerings like city breaks.
Group revenue increased 14% to £128 million, while adjusted profit before tax rose 25% to £31 million. A £25 million share buyback programme was also announced.
The shares rose 24.6p to 196.2p. Shore Capital reiterated its 'buy' on the stock stating that the current valuation does not accurately represent its strengths and potential.
Specifically, the company’s price-to-earnings ratio (PER) is in the high single digits, and its enterprise value to earnings before interest, taxes, depreciation, and amortisation (EV/EBITDA) ratio is in the low single digits.
These figures suggest the stock is relatively cheap compared to its earnings and cash flow, ShoreCap noted.
However, these metrics overlook key factors such as the company’s asset-light business model, which allows it to operate efficiently without owning heavy infrastructure, and its significant total addressable market (TAM), indicating room for growth, the regional broker pointed out. Additionally, On the Beach is steadily improving its profitability, making it a strong candidate for higher valuation.