Norwegian Air Shuttle ASA and its subsidiaries operate airlines through a global route network. It offers scheduled and chartered services and attempts to maximize aircraft and crew utilization. Approximately three-fourths of total revenue is derived from transporting passengers, with the remainder coming from ancillary and other air-related services. Norwegian Air utilizes a frequent-flyer program, and additional services may be purchased to aid special travelling accommodations. The company’s route portfolio spreads to the Americas, the Middle East, and Asia, but roughly one-fifth of revenue stems from routes through Norway, Sweden, Denmark, and Finland.Description taken from www.nordnet.se
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.
|Operational cash flow (MNOK)||805||674||287|
|Operational cash flow (MNOK)||2357||3046||2901||463||3038|
ROIC rates and P/E are from gurufocus.com
|Yearly average||10 year||5 year||1 year|
|Sales Growth Rate||20%||18%||8%|
|EPS Growth Rate||n/a||n/a||n/a|
|Equity Growth Rate||10%||9%||142%|
|Cash Flow Growth Rate||16%||7%||556%|
|Growth rates x 2||Average P/E||Median P/E|
|Calculated future price in 10 years|
|Margin of Safety (50%)|
Current price: 1.3 NOK
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 Finnair and Lufthansa since these are some of the companies I can trade through my broker.
To read my post where I compare with Lufthansa and Finnair follow the link below.
Finnair vs Lufthansa vs Norwegian – comparing airlines