On Wednesday, RBC Capital adjusted its financial outlook for Ryanair (RYA:ID) (NASDAQ: RYAAY), raising the price target to EUR25.00 from the previous EUR24.00. The airline maintains its Outperform rating, indicating a positive performance expectation.
The revision comes after a reassessment of Ryanair's earnings potential, with an approximately 2% average increase in earnings per share (EPS) estimates for the years 2023/24E to 2025/26E. The upward adjustment is attributed mainly to a decrease in anticipated fuel expenses.
RBC Capital also solidified its forecast for Ryanair's net cash position, expecting it to approach £1 billion. This adjustment is partly due to capital expenditure timing changes caused by delays in aircraft deliveries from Boeing (NYSE:BA).
The new price target of EUR25 represents a valuation of Ryanair at roughly 6.5 times its projected 2024/25 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). This valuation is below the 10-year median of approximately 7.6 times EV/EBITDA.
The analyst's statement emphasized the reasoning behind the price target increase and the positive outlook for Ryanair, highlighting the financial recalibration based on the latest operational and market factors affecting the airline's performance.
InvestingPro Insights
As RBC Capital underscores the potential of Ryanair, real-time data from InvestingPro aligns with the positive outlook. The market currently values Ryanair with a market cap of roughly $25.23 billion USD, and the company is trading at a P/E ratio of 13.86, which is notably attractive when considering the adjusted P/E ratio over the last twelve months as of Q3 2024 is even lower at 11.77. This suggests that the company is trading at a discount relative to its recent earnings growth.
InvestingPro data also highlights a robust revenue growth of nearly 30% over the last twelve months leading up to Q3 2024, showcasing the airline's ability to expand its earnings. Additionally, with a PEG Ratio of just 0.23 for the same period, Ryanair's share price growth seems to have lagged its earnings growth rate, indicating potential for future price appreciation if the trend continues.
Among the several InvestingPro Tips, two particularly stand out in the context of the article: Ryanair holds more cash than debt on its balance sheet, which supports RBC Capital's positive view on the company's net cash position. Furthermore, analysts are not only predicting sales growth in the current year but also anticipate the company to be profitable, which aligns with the raised earnings estimates and outperform rating from RBC Capital.
For those interested in a deeper dive into Ryanair's financials and to access additional insights, InvestingPro offers more tips on the company. Readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. As of now, there are 9 more InvestingPro Tips available that could further inform investment decisions regarding Ryanair.
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