My tip this month is easyJet, one of the airlines that led the way in the 1990s for cheap flights, for five good reasons which should see
its share price hit 450p over the next 12 months.
EasyJet generated £424m of operating cash last year. This performance brought its net cash position up to £100m by the end of September.
Passengers, even business travellers, trade down in tough economic times and have turned to easyJet for budgetary reasons. The airline is flying to leading airports and, as a result, attracts more business travellers.
The easyJet group is making a high return on capital employed
– 12 per cent. But the no-frills airline aims to beat this mark.
EasyJet makes healthy profits, too. Pre-tax profits of £248m were recorded in 2011. Some analysts predict a slight fall to £214m for 2012 and then a sharp rise to £251m in the following year.
Bank of America Merrill Lynch expects easyJet to post pre-tax profits of £246m for 2012 – comfortably over market expectations. Buy easyJet with a trailing stop/loss at 20 per cent to protect you against any major market fallbacks.
Malcolm Craig is an investment analyst and author
Stockmarket and alternative investments can fall as well as rise in value. Readers should consult their own professional advisers.
