Are National Express shares one of the best travel stocks to buy?

Jabran Khan wants to know if National Express shares could be a good travel stock to add to his holdings to help diversify his portfolio.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I am looking to diversify my portfolio and have been reviewing travel stocks recently. One stock I am currently interested in is National Express (LSE:NEX). Could the shares be a shrewd addition to my holdings? Let’s take a closer look.

Helping people travel

As a quick reminder, National Express is a bus, train, light rail, express coach, and airport services travel provider based in the UK. It also has international operations in the US and Australia.

So what’s happening with National Express shares currently? Well, as I write, they’re trading for 186p. At this time last year, the stock was trading for 270p, which is a 31% decline over a 12-month period. It is worth noting that many travel stocks have seen their share prices struggle since the pandemic.

The bull and bear case

Firstly, I believe that National Express has a distinct advantage over many of its competitors in the travel sector. Its large size, coupled with its geographical footprint, is advantageous. Next, due to its profile and presence, it often wins lucrative contracts, which is positive for me as a potential investor. Contractual agreements usually offer stable revenue streams.

When the pandemic struck, National Express shares suffered badly. Demand for public transport dwindled and 2020 performance was reflected in this too. Revenue and profit levels dropped in 2020, after previous years of growth. The good news is that 2021 performance surpassed 2020, which means the business is on the right track once more. I am keen to see 2022 performance but in terms of looking back, I do understand past performance is not a guarantee of the future.

Next, at current levels, National Express shares look good value for money on a price-to-earnings ratio of just six. This tells me they could be excellent value to buy now and hold on to for the long term for growth and eventual returns.

National Express must navigate some serious headwinds currently, however. Soaring inflation, coupled with rising costs have placed real pressure on operations, performance, and returns. Profit margins are being squeezed by rising costs such as for fuel.

Finally, there have been talks of strikes across the travel sector in recent months, especially here in the UK where some have taken place. This could affect performance and returns, as well as investor sentiment for National Express.

My verdict

Overall, I would buy National Express shares for my holdings. I am buoyed by its profile, presence, and its past track record. The shares also look too good to miss on current levels.

I am not concerned by the current headwinds, and don’t foresee these as longer-term issues. In fact, the current cost-of-living crisis could be beneficial for National Express shares. This is because cheaper, low-cost travel options will increase in demand for consumers. This could boost performance and returns upwards.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Up 105% in a year! Is this rocketing FTSE bank the perfect pick for my Stocks and Shares ISA?

Harvey Jones is drawing up a shortlist of stocks to purchase inside his Stocks and Shares ISA allowance. This FTSE…

Read more »

Investing Articles

Is it madness to buy Palantir shares after Q3 earnings?

Palantir stock's surging again after the firm's Q3 earnings report. But after a 150% gain, is it too late to…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

£6,000 in savings? Here’s how I’d aim to turn that into £1,032 a month of passive income!

A small investment in high-dividend-paying stocks with the returns used to buy more shares can generate big passive income over…

Read more »

Chalkboard representation of risk versus reward on a pair of scales
Investing Articles

As Lloyds’ share price tumbles 14%, is this an unmissable opportunity for me to buy at a bargain-basement price?

The Lloyds share price is substantially below its year high, but decent earnings prospects should drive its price and dividend…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

2 UK shares that could rise if Trump wins the Presidential election

These UK shares are among the FTSE 100's most popular stocks. And they could rise in value if Donald Trump…

Read more »

Closeup ruffled American flag representing US stocks and shares
Investing Articles

2 UK stocks that could rise if Harris wins the Presidential election

Royston Wild believes these UK stocks could receive a bump if Kalama Harris wins the Presidency, giving their share prices…

Read more »

Investing Articles

After a 96% plunge, is buying more Aston Martin shares throwing good money after bad?

Just two weeks after buying Aston Martin shares Harvey Jones found himself nursing a painful loss. Yet after recent news…

Read more »

Investing Articles

After crashing 45% in October, should I buy this FTSE 250 share for my Stocks and Shares ISA?

Roland Head explains why he’s tempted to add this risky FTSE 250 turnaround share to his Stocks and Shares ISA…

Read more »