The FTSE 100 is home to some big-name stocks, but not all of them are soaring right now. One company that’s caught my attention is easyJet (LSE: EZJ).
As I write on 24 February, shares in the budget airline are down 11.4% since the start of 2025. This is despite the Footsie gaining more than 5% in the same time.
The company is synonymous with budget travel in Europe and has been working hard to expand its flight network. I wanted to see if this well-known name with promising financials and a beefed-up dividend would be a good fit for my portfolio.
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How has the easyJet share price been travelling?
easyJet had a strong 2024. The airline posted a 34% jump in pre-tax profits to £610m, driven by a record-breaking summer. Revenue climbed 14% to £9.3bn, with almost 90m passengers flying with the carrier.
The stock’s post-pandemic recovery was punctuated by management more than doubling the dividend from 4.5p to 12.1p per share.
Despite the impressive annual results, easyJet’s valuation has slid lower in the early part of 2025. Management pointed to this year’s timing of Easter as a key reason for the weaker-than-expected second quarter, as well as investments in new, longer routes that will take a while to reach full potential.
Valuation
Let’s talk numbers. At its current £4.93 share price, easyJet has a price-to-earnings (P/E) ratio of 8.3. This is similar to Ryanair (8.9) but pricier than Wizz Air (6.6). That to me says it is valued reasonably fairly compared to peers.
Of course, these figures are a lot lower than the Footsie average of around 14.5. That’s largely due to the fact that airlines are reliant on consumers spending on travel and leisure, which means their performance can be lower when the economy is in trouble.
The dividend yield is currently 2.5%, which isn’t the highest in the Footsie, but it’s a big improvement from previous years.
My verdict
There’s a lot to like about easyJet right now. Despite the second-quarter wobble, passenger numbers remain solid, while profits and revenues seem to be trending the right way.
Management appear confident in the outlook after more than doubling the dividend. The relative valuation doesn’t give me too much cause for concern.
However, it’s not all sunshine and rainbows. The inherent cyclicality of earnings driven by consumer spending is one reason why easyJet shares could suffer in a recession. Throw in rising geopolitical tensions and uncertain fuel costs, and there are plenty of potential downsides to owning the stock.
On balance, I think easyJet goes in the ‘to watch’ pile for me. There’s no compelling reason for me to buy right now so I think I’ll be investing funds in more defensive sectors like pharmaceuticals for the moment.
