We came across a bullish thesis on Ryanair Holdings plc (RYAAY) on Etcaetera - Easy Investing With a Portfolio Manager’s Substack by Akim. In this article, we will summarize the bulls’ thesis on RYAAY. Ryanair Holdings plc share was trading at $43.30 as of Oct 10^th. RYAAY’s trailing and forward P/E were 14.00 and 14.31 respectively according to Yahoo Finance.

A landscape view of a passenger and cargo airplane taking off from the airport runway.

Ryanair Holdings (RYAAY) is a leading low-cost airline based in Ireland, known for its hyper-efficient operations and competitive pricing. Founded in 1984, the company has grown into a dominant force in European aviation, with an expanding presence in North Africa and a reputation for offering some of the lowest airfares in the industry. Ryanair generates its revenue through passenger services, ancillary services like baggage fees, seat reservations, and onboard sales. Its business model is centered on keeping operational costs low while maintaining high passenger volumes. The company’s unmatched efficiency allows it to transport passengers at an industry-low PAX cost of €33.7 per passenger. This cost advantage over competitors like Wizz Air and EasyJet, and even larger operators like Lufthansa, underscores its dominance.

Investors should consider Ryanair for several reasons. Despite recent headwinds, the company has demonstrated resilience, reporting a 10% increase in traffic for Q2 2024, reaching 55.5 million passengers, and launching a record summer schedule with new bases and routes. While Q2 profit declined to €360 million due to weaker-than-expected airfares and Easter timing, Ryanair's balance sheet remains one of the strongest in the sector. With €4.49 billion in gross cash and a BBB+ credit rating, the airline is well-positioned for future growth, especially as it expects 8% traffic growth in 2024.

Valuation-wise, Ryanair is trading at a significant discount to both its sector and historical averages. At 14x forward earnings and 1.2x sales, it is undervalued compared to competitors, making it an attractive buying opportunity. The company is also highly shareholder-friendly, having returned over €7.8 billion to shareholders since 2008, with an ongoing share buyback program. Key risks include Boeing delivery delays, which could hinder Ryanair's fleet expansion plans, and rising fuel prices, although Ryanair has hedged a substantial portion of its fuel needs through 2026. Despite these risks, Ryanair’s cost efficiency, solid balance sheet, and attractive valuation make it a compelling investment in a challenging industry.

Ryanair Holdings plc is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 20 hedge fund portfolios held RYAAY at the end of the second quarter which was 20 in the previous quarter. While we acknowledge the risk and potential of RYAAY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RYAAY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.