At the beginning of 2019, I highlighted airline groups Wizz Air Holdings (LSE: WIZZ) and Ryanair (LSE: RYA) as my two top growth stock buys for 2019.
At the time, I noted both had impressive track records of growth, with ambitious plans for the future which, I believed, should continue to lead to improving shareholder returns in the years ahead.
And it appears I was bang on the money with Wizz. Over the past 12 months, the stock has outperformed the broader market by 24.7%, including dividends. Year-to-date, the stock is up 40.2%, having exceeded the broader market by 28% since the beginning of January.
Ryanair’s achievement has been a little less impressive, but the stock has still chalked up a winning performance. Over the past 12 months, shares in the low-cost airline are up 18%, including dividends, and year-to-date the stock is up 27.2%. I see no reason why this impressive performance cannot continue into 2020.
Rapid growth
These airlines are some of the largest low-cost carriers in Europe, but passenger numbers are still growing at a rapid clip. Indeed, at the beginning of this month, Ryanair announced group traffic rose by 5.8% to 11m passengers in November, from 10.4m in November 2018. On a rolling annual basis, group traffic has grown 9.0% to 151.6m.
At the same time, Wizz Air also reported a November capacity increase. Passengers last month rose by 25% to 3m, and the group’s load factor hit 92.8%, up from 91.2% a year ago.
On a rolling annual basis, the Hungarian carrier’s total number of passengers was up 17% to the end of November at 39.1m.
Undervalued
These impressive passenger growth figures mean even after the stock’s remarkable performance over the past 12 months, shares in Wizz look cheap compared to its projected growth rate for the next two years.
City analyst shave pencilled in earnings per share growth of 17% for 2020, and 23% for 2021, which puts the stock on a 2021 P/E of 13.6. It’s also trading at a PEG ratio of 0.7, implying the stock offers growth at a reasonable price.
Shares in Ryanair also still appear to offer value from a growth perspective. The stock is trading at a 2021 P/E of 13.6 with earnings per share on track to increase by more than 30% over the next two years, according to City analysts.
Unlike Wizz, Ryanair also offers its investors a small dividend. The dividend yield on the stock currently stands at 0.4%, although the company has also been known to announce special dividends when it has the balance sheet capacity to do so.
The bottom line
So overall, even though shares in these two airlines have substantially outperformed the market over the past 12 months, I think they still have plenty of room left to run over the next 12 months. That’s a distinct possibility given they continue to increase passenger numbers and reinvest in their fleets to drive growth through new routes and a better customer experience.
