Dart Group share price: is it time to buy?

The Dart Group (LSE: DTG) share price is recovering from its 85% plunge during the stock market crash. Is now the time to buy in?

| 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.

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.

The Dart Group (LSE: DTG) share price is in recovery. Previously caught in the stock market crash, it plummeted 85% in a single month earlier this year. However, investor confidence is returning to the AIM-listed travel-leisure business.

Notably, the last couple of months witnessed Dart’s directors buying up the stock. CEO Philip Meeson now holds over 48m shares, more than all its institutional investors put together.

This is an owner-managed company signalling confidence in its forecast position. Is now a good time for us to buy into it too? 

The future of aviation

Investing oracle Warren Buffett famously advised investors to be greedy when others are fearful. And there’s little doubt that many are fearful of airlines right now. However, far from being greedy, Buffett recently dumped his airline stocks, very likely selling low after buying high. This indicates that he could also be fearful for the future of commercial aviation.

He may be right. The coronavirus pandemic is probably the toughest challenge yet for the airline industry. The global enforced shutdown destroyed passenger numbers almost overnight. In addition, fears about another virus peak and upcoming recession mean passenger numbers may take years to recover.

However, according to Dart Group, bookings are staying strong for late summer 2020 and winter 2020/21. Apparently, an “encouraging number” of people are choosing to rebook holidays with Jet2, its low-cost airline, rather than cancel them. It may be that people want to spread their wings after lockdown. If so, the travel industry may recover more quickly than expected.   

Dart Group share price fundamentals

Prior to the stock market crash, the Dart Group share price reflected the company’s noteworthy earnings performance. Revenues and pre-tax profits were trending upwards over the previous five years, and earnings per share increased from 21.3p in 2015 to 96.4p in 2019.

Compared with its competitors, Dart’s financial position is still very strong. Notably, it is the only one of its peers to report a net cash position. In other words, it’s still able to pay its short-term debts from the cash the business generates. By comparison, IAG and easyJet‘s net cash position is negative.

Dart Group’s recent sale of Fowler Welch, its former distribution and logistics business, for £98m will help this further. It may also assist the group in continuing to pay its 1.2% dividend yield to its shareholders. Although this dividend is small, it’s grown year on year since 2015. Something to bear in mind.

On the other hand, rising fuel costs, up to 20% of operating expenses for some airlines, reduced margins across the industry in 2019. Airlines often hedge their fuel costs and Dart Group’s Jet2 is no different. Consequently, the firm is likely to have already locked in higher fuel prices for the next year or two.  

However, no one could have predicted oil prices would tank so badly this year. With many airlines already having hedged their fuel costs, this is good news for companies like BP. Not so much for the Dart Group share price.

On the flip side, there may be future gains from any recent hedging activity. Possibly something for the firm to look forward to. 

Dart Group is a profitable ray of light in an otherwise gloomy aviation sector. It could be a great recovery buy as a riskier investment in an otherwise balanced portfolio. 

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.

More on Investing Articles

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »