Has the Trainline share price just turned the corner?
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After releasing its annual outcomes in the present day (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 in the present day, that they had been on a downward pattern. In that interval the worth fell by over a fifth.
Might 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 effectively final 12 months, explaining in the present day’s soar. Annual revenues grew 21% to £397m. Working money circulation soared over tenfold to £91m.
Whereas the core UK market carried out effectively, so did the worldwide ticket gross sales enterprise. Revenues in that division grew 17%, though at £53m they have been roughly 1 / 4 of the UK quantity.
The strongest income development of all — 23% — was delivered by the options enterprise, which is basically a platform Trainline gives for patrons like company journey brokers. With revenues of £135m, it is a sizeable operation.
Fundamental earnings per share jumped 61% to 7.3p, that 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 is just actually scratching the floor of most markets. Its established know-how can assist 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 might 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 chance as a risk for the corporate.
One other danger is the enterprise mannequin. Why ought to I pay Trainline a fee for a ticket when (in some instances) I can use its web site or app to search out the ticket then guide it instantly with a practice firm, avoiding commissions? Trainline famous in the present day that it has an “elevated deal with non-commission income technology.”
Second-class valuation
One other concern I’ve had about Trainline for the reason that pandemic is what occurs if journey largely dries up for a sustained time period.
That would see revenues hit the buffers. However in contrast to practice operators, ticketing platforms aren’t excessive up a authorities’s checklist of important service suppliers.
But if enterprise momentum continues at its present excessive charge, I feel the Trainline share worth may choose up pace.
However the P/E ratio is increased than I’m comfy with. The valuation already seems to be a bit excessive for my tastes (similar to numerous practice tickets) so I cannot be getting on board.