Here’s what I consider to be the very best ASX 200 share to buy in August

A woman wearing a hat, sunglasses and a bathing suit reads the newspaper while sitting on a lounging chair that's placed in a pool in a relaxing setting.A woman wearing a hat, sunglasses and a bathing suit reads the newspaper while sitting on a lounging chair that's placed in a pool in a relaxing setting.

There are a number of attractive S&P/ASX 200 Index (ASX: XJO) shares to consider this month, in my opinion. From that list, Webjet Limited (ASX: WEB) could be a top pick to consider this month.

I’ve gone for Webjet as my ASX 200 share pick this month, but I’ll point out that my monthly Fool writer pick was Temple & Webster Group Ltd (ASX: TPW) (which I ‘picked’ when the share price was $4). Though, Temple & Webster isn’t an ASX 200 share.

The ASX 200 travel share has not seen a bounce in recent weeks like other ASX growth shares. For example, the Xero Limited (ASX: XRO) share price has risen 18.75% over the past month, the Altium Limited (ASX: ALU) share price has gone up 14%, and the WiseTech Global Ltd (ASX: WTC) share price has risen 31%.

I think the Webjet share price looks good for the shorter term and long term for a couple of reasons.

Oil price is falling

One of the key things that can increase the cost of travel is the price of fuel. The Russian invasion of Ukraine saw a significant bump in oil prices. But, over the past two months, the oil price has dropped by approximately US$20 per barrel.

While some people may not plan their travel around what the oil price is doing, it could help in the medium term if travel doesn’t cost as much.

However, the Webjet share price has not gone up to reflect this positive development.

Demand is rebounding

Inflation and higher interest rates could certainly cause some uncertainty in the ASX travel share sector.

Webjet said at the time of its FY22 result that trading continues to improve on the back of increased demand and opening borders. It said that FY23 first quarter trading for the group was tracking “well ahead” of the FY22 fourth quarter in terms of bookings, total transaction value (TTV) and earnings before interest, tax, depreciation and amortisation (EBITDA).

The ASX 200 travel share has seen “strong bookings momentum” for the Webjet online travel agency (OTA) as Omicron “settles” and international tourism recommenced. Total bookings for May were tracking at around 80% of pre-COVID levels.

The company said it continues to extend its lead as the number one online travel agent in Australia and New Zealand. Management is “excited” by the growth opportunities in international flights and, in particular, by what Trip Ninja technology will allow it to offer in that space.

Based on the current bookings trajectory, Webjet has remained “on track” to be at pre-COVID booking volumes by the second half of FY23.

Good outlook for profit margins

For starters, I’ll point out that the business returned to profitability in the second half of FY22. The Webjet OTA was profitable for the whole year despite the border closures and the Omicron impact. I think this is helpful for the Webjet share price.

The business is very scalable, thanks to its online model. Webjet notes that in the second half of FY22, revenue was up 63% compared to the first half of FY22, whereas expenses only went up 10%.

Webjet said costs were “expected to increase as more markets open but at a significantly lower rate than revenue, reflecting increased efficiencies across the business”.

WebBeds, the business-to-business (B2B) segment, looks particularly exciting to me. Its expenses are “significantly lower” than pre-pandemic levels, partially thanks to automating labour-intensive processes.

WebBeds is reportedly on track to be 20% more cost efficient when at pre-pandemic booking volumes despite global wage pressures. It could reach an EBITDA margin of 62.5%.

Putting these elements together makes me think the Webjet share price has a promising future.

The post Here’s what I consider to be the very best ASX 200 share to buy in August appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.* Scott just revealed what he believes could be the “five best ASX stocks” for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now

See The 5 Stocks
*Returns as of July 7 2022

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

Motley Fool contributor Tristan Harrison has positions in Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium, Temple & Webster Group Ltd, WiseTech Global, and Xero. The Motley Fool Australia has positions in and has recommended WiseTech Global and Xero. The Motley Fool Australia has recommended Temple & Webster Group Ltd and Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/EMndwkW

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s