Air travel has become as commonplace as taking a bus. Dublin-based Ryanair Holdings plc (RYA.I) runs a no-frills airline, catering to consumers who are just looking to get to their destination for a low price. The company seems to be firing on all cylinders, its flights seemingly all full. The airline seems to be running efficiently and low oil prices are only improving profitability, although most airlines benefit from this.
Ryanair also seems to have set itself apart based on other metrics. Earnings at Ryanair seem to be coming from sustainable sources, and the strong Earnings Quality model score of 97 indicates that profits con continue to remain solid.
Source: Thomson Reuters Eikon/StarMine
Lofty RNOA
Return on net operating assets is one of the key metrics to measure management’s ability to turn assets into returns. By this measure, Ryanair has been doing well over the past five years. In fact, trailing 4Q return on net operating assets is currently at a 10 year high of 38.3%, compared to the industry median of 13.8%. Note how the industry and Ryanair were identical on this measure just three years ago. It shows how management has succeeded in making the low fare strategy work by keeping its flights full.
Source: Thomson Reuters Eikon/StarMine
Climbing revenue
Ryanair has continued to see healthy revenue growth for the last seven quarters. Based on the strong guidance from the last quarter, it looks like that growth is likely to continue. Consider that while other airlines are expanding capacity and now starting to see load factors fall, Ryanair has been very careful about expanding capacity. In fact, load factors are at an all time high of 93%, 7 percentage points above the industry median.
Operating margins have been increasing too, and not just attributable to cheaper oil prices. In fact, CEO Mike O’Leary on the last earnings call sounded very optimistic about results going forward. He attributed some of that to the “Always Getting Better” program started to improve customer satisfaction, something that might seem alien to a low price carrier. That has enabled Ryanair to increase fares slightly, and the fact that their flights are more packed than ever stands testimony to their success.
Source: Thomson Reuters Eikon/StarMine
Safe landings
In fact, Ryanair performs strongly on almost every StarMine model. With little or no credit risk and strong earnings quality and price momentum, it looks like institutional investors may be excited about Ryanair’s fundamentals. This model takes a look at what institutional investors value currently based on their holdings. Ryanair seems to perform well on those metrics. Strong earnings quality is a sign of sustainable strong earnings going forward, and management indicates that that may indeed be the case. This carrier seems to be taking off.
