Numbers analysis: Finnair Oyj

Finnair Oyj is a Finland-based airline company which provides air transport operations and supporting services. It is engaged in delivering services for scheduled passenger and charter traffic as well as cargo sales, customer service and service concepts, flight operations and activities connected with the procurement and financing of aircraft. The company also provides travel services which consist of travel agency operations as well as tour operations and travel sector software business operations. Its travel services provide various travelling packages to customers through its travel operators and travel agencies. It manages its business in two segments namely Airline Business and Travel Services. The company’s majority of the revenue comes from passenger ticket sales and belly cargo.

Description taken from www.nordnet.se

Charts

10 year weekly chart
1 year daily chart

Statistics

The numbers analysis below is the first step in Rule 1 Investing by Phil Town. In his book Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week! (no affiliate) he writes about his investing philosophy which centers around four key principles he refers to as the Four M’s: Meaning, Moat, Management and Margin of Safety.

The first requirement is an average annual growth rate of at least 10%, the past 10 years, in the ROIC (Return On Invested Capital), Sales, EPS (Earnings Per Share), Equity and Cash Flow. The average 5 year and 1 year growth rates should also be above 10%. High growth rates suggest a sustainable MOAT.

Next step is to analyse the the Four M’s: Meaning, Moat, Management and Margin of Safety.

The aim is to find a fantastic company, with a great track record, to invest in for at least 10 year. The expected average yearly return is at least 15%. This is used in the calculations. With an investment of 100 USD and a yearly return of 15%, 100 USD will have increased to 405 USD in 10 years time because of interest-on-interest or compound interest.

Year20102011201220132014
ROIC
Sales (MEUR)20232258244924002284
EPS (EUR)-0.24-0.750.010.11-0.71
Equity/share (EUR)6.675.896.065.34.02
Operational cash flow (MEUR)765115514224
P/E-21.09-3.07174.9625.02-3.47
Year20152016201720182019
ROIC-0.4%1.6%5.0%4.6%3.4%
Sales (MEUR)22552317256828363098
EPS (EUR)0.570.551.230.70.49
Equity/share (EUR)5.696.737.957.27.57
Operational cash flow (MEUR)171220382504565
P/E9.467.3210.4310.1712.12

Growth Rates

Yearly average10 year5 year1 year
ROIC3%3%3%
Sales Growth Rate5%8%9%
EPS Growth Raten/a-4%-30%
Equity Growth Rate1%7%5%
Cash Flow Growth Rate29%35%12%
Growth rates x 2Average P/EMedian P/E
P/E2.0022.199.80
Calculated future price in 10 years1.0812.015.3
Calculated Price0.2731.33
Margin of Safety (50%)0.141.50.66

Current price: 0.55 EUR

I’m mainly looking into airline companies because I’m looking for possible trades.

To be considered for further analysis here, as a growth stock, the requirement is that the 10 year yearly average growth rate is at least 5% in all five categories. They are not.

However I will also have a look at Lufthansa and Norwegian Air Shuttle since these are some of the companies I can trade through my broker.

To read my post where I compare with Lufthansa and Norwegian Air Shuttle follow the link below.
Finnair vs Lufthansa vs Norwegian – comparing airlines

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