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After releasing its annual outcomes at the moment (3 Might), Trainline (LSE: TRN) has a full head of steam. As I write this on Friday morning, the Trainline share worth has placed on 9% because the Metropolis digests the newest numbers from the ticketing firm.
Meaning they’ve moved up 37% over the previous 12 months.
Over the previous six weeks earlier than at the moment, that they had been on a downward pattern. In that interval the worth fell by over a fifth.
May the outcomes be a lift for the shares after the current weak efficiency – and may they alter my thoughts on investing?
First-class enterprise efficiency
The corporate did nicely final 12 months, explaining at the moment’s soar. Annual revenues grew 21% to £397m. Working money move soared over tenfold to £91m.
Whereas the core UK market carried out nicely, so did the worldwide ticket gross sales enterprise. Revenues in that division grew 17%, though at £53m they had been roughly 1 / 4 of the UK quantity.
The strongest income development of all — 23% — was delivered by the options enterprise, which is actually a platform Trainline gives for purchasers like company journey brokers. With revenues of £135m, this can be a sizeable operation.
Fundamental earnings per share jumped 61% to 7.3p, which means the Trainline share price-to-earnings (P/E) ratio now sits at 45.
Clear line forward?
I reckon Trainline can continue to grow at pace.
It nonetheless has substantial scope to extend market share within the UK. In Continental Europe it’s only actually scratching the floor of most markets. Its established expertise will help it construct enterprise there, as it’s already proving in international locations like Spain.
That mentioned, I see some dangers.
One is the beforehand mooted nationalisation of practice ticketing within the UK. It could not occur any time quickly (if in any respect) and even when it does, Trainline’s expertise may imply it’s truly as a lot of a possibility as a menace for the corporate.
One other threat is the enterprise mannequin. Why ought to I pay Trainline a fee for a ticket when (in some circumstances) I can use its website or app to search out the ticket then ebook it instantly with a practice firm, avoiding commissions? Trainline famous at the moment that it has an “increased focus on non-commission revenue generation.”
Second-class valuation
One other concern I’ve had about Trainline because the pandemic is what occurs if journey principally dries up for a sustained time period.
That might see revenues hit the buffers. However in contrast to practice operators, ticketing platforms aren’t excessive up a authorities’s record of important service suppliers.
But if enterprise momentum continues at its present excessive charge, I believe the Trainline share worth may decide up pace.
However the P/E ratio is larger than I’m comfy with. The valuation already appears a bit excessive for my tastes (similar to a variety of practice tickets) so I cannot be getting on board.
