Up 28%, can the easyJet share value maintain rising?

The previous yr has seen easyJet (LSE: EZJ) report robust demand and produce again its dividend. Over 12 months, the easyJet share value has grown 28%.

The place would possibly issues go from right here – and will I make investments?

Robust efficiency and strong demand

On the interim outcomes stage in Could, easyJet reported excellent news on buyer demand.

Passenger numbers had been up 11% in comparison with the identical interval the prior yr. Income jumped 23% to £3.3bn. In the meantime, headline prices (that’s, prices excluding one-offs) grew extra slowly, by 17%.

Nonetheless, there was a headline loss earlier than tax of £350m. That’s substantial, particularly provided that the corporate that has a market capitalisation of lower than £4bn.

Summer season is the height season for airways like easyJet and the corporate anticipated a robust season to spice up earnings strongly. Final yr’s internet earnings got here in at £324m. That signifies that the present price-to-earnings (P/E) ratio is 11. If the corporate delivers on its anticipated earnings progress then the potential P/E ratio might be decrease nonetheless.

For the reason that interim outcomes, an additional quarterly buying and selling assertion confirmed robust passenger numbers and improved headline revenue in comparison with the identical quarter final yr. On high of that, the previously indebted firm reported a internet money place on the finish of the primary half.   

easyJet shares don’t look costly to me

Given the airline’s latest efficiency, I don’t assume the easyJet share value is excessive. If the enterprise retains performing effectively, I reckon it may go increased.

It has a robust model and confirmed enterprise mannequin. It has internet money and expects to be worthwhile this yr. The valuation relative to earnings appears to be like low-cost – and the dividend has been introduced again.

Nonetheless, I’m not tempted to purchase. If I had invested £1,000 in easyJet shares 5 years in the past, my holding would now be price rather less than £480, even after the robust efficiency over the previous 12 months. On high of that, having purchased when the enterprise was paying a daily dividend, I’d then have seen these passive earnings streams dry up unexpectedly for plenty of years.

Previous efficiency shouldn’t be essentially indicative of what is going to occur subsequent within the inventory market. However the causes for easyJet’s efficiency over the previous 5 years replicate ongoing dangers I see within the aviation trade.

Demand is tough to foretell. It may be affected by a weak economic system and decimated by occasions outdoors a service’s management, from health-related journey restrictions to a terrorist assault.

That’s not a sexy enterprise mannequin to me. I don’t assume the present easyJet share value, low-cost although it appears, affords me a adequate margin of security as an investor ought to a few of these dangers come to go, as I anticipate they are going to sooner or later within the coming years (although doubtlessly not for a very long time). So, I’ve no plans to purchase.