Liberum said the travel agent, which specialises in beach holiday packages, is disrupting the traditional tour operator industry and capturing market share.
Earnings (EBITDA) and earnings per share have a forward three-year compound annual growth rate of 16.4% and 15.7%, respectively, the broker said.
“The market is undervaluing OTB’s long term potential and not recognising the option value from international expansion, long-haul product growth, and the diversification into offline/b2b,” Liberum said, adding that the share price provides an “excellent entry point.”
Last month, the company said it remains confident in its outlook after revenue from its core UK business jumped 20% in the four months to the end of January.
The travel agent saw strong mobile traffic, conversion growth and repeat purchases in the four-month period on the back of “incremental” offline marketing activity and an “increasingly efficient” online marketing spend.
On the Beach has been expanding into long-haul destination sales, having completed the full build of direct technical integration into the Emirates flights systems in January. It plans to add further carriers and hotels for long-haul holidays throughout the rest of the year.
“We expect OTB’s long-haul products to grow rapidly and international markets to make positive contributions from FY22,” Liberum said.
“Proof that the model can be replicated overseas should unlock future options.”
Following the acquisition of Classic Collection Holidays in August 2018, the company is building a platform for its online agent-only booking portal, Classic Package Holidays. The portal was due to be launched in March.
“The launch of the Classic Package Holidays portal will appeal to independent travel agents and allow OTB to enter the sizeable offline package holiday market (est £7bn pa), with high revenue potential and diversification benefits,” Liberum said.
In late-morning trading, shares rose 1.1% to 400.5p.