Editing EasyJet plc
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'''Sustainability''' | '''Sustainability''' | ||
Aviation accounts for 2.5% of global CO2 emissions according to a report by 'Our World In Data' (2020). Planes emit CO2 from burning fuels. On top of CO2, aircraft engines emit other gases – nitrous oxides (NOx), sulfur dioxide (SO2) and water (H2O) – and particulate matter (soot). When emitted at high altitudes, these emissions affect atmospheric physical and chemical properties (source-Transport and Environment). If looked at distance/consumption, the most fuel is consumed during take-off and climbing. Also the higher the flight range, the higher the share of fuel consumed while cruising. EasyJet's main focus is on short-haul flights (low range), which might lead to lower fuel consumption while cruising. However, due to frequent takeoffs and landings on short-haul routes, the distance/consumption ratio is affected as these phases significantly contribute to fuel usage. Sustainability in aviation could be achieved through improvements in aircraft and engine efficiency, the use of sustainable aviation fuels, more efficient operations and airspace, the use of robust carbon offsets and investment in innovative carbon removal solutions could address the residual, according to a report by Sustainable Aviation. | Aviation accounts for 2.5% of global CO2 emissions according to a report by 'Our World In Data' (2020). Planes emit CO2 from burning fuels. On top of CO2, aircraft engines emit other gases – nitrous oxides (NOx), sulfur dioxide (SO2) and water (H2O) – and particulate matter (soot). When emitted at high altitudes, these emissions affect atmospheric physical and chemical properties (source-Transport and Environment). If looked at distance/consumption, the most fuel is consumed during take-off and climbing. Also the higher the flight range, the higher the share of fuel consumed while cruising. EasyJet's main focus is on short-haul flights (low range), which might lead to lower fuel consumption while cruising. However, due to frequent takeoffs and landings on short-haul routes, the distance/consumption ratio is affected as these phases significantly contribute to fuel usage. Sustainability in aviation could be achieved through improvements in aircraft and engine efficiency, the use of sustainable aviation fuels, more efficient operations and airspace, the use of robust carbon offsets and investment in innovative carbon removal solutions could address the residual, according to a report by Sustainable Aviation. | ||
easyJet has 168 A320neo family aircraft in its orderbook. This more efficient Airbus NEO aircraft will reduce fuel burn, carbon emissions and related costs. | |||
Recently, EU agreed to world’s largest green fuels mandate for aviation. The green fuels law for aviation – known as ReFuelEU – stipulates that, from 2025, all flights departing from an EU airport will be obliged to uplift a minimum share of sustainable aviation fuels (SAF), starting at 2% in 2025. In 2030, the percentage will rise to 6%, and gradually to 70% by 2050. | |||
== Market == | == Market == | ||
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=== What's the expected return of an investment in the company? === | === What's the expected return of an investment in the company? === | ||
The Stockhub users estimate that the expected return of an investment in EasyJet plc over the next five years is '''positive 8.5%'''. This value was arrived at through the use an intrinsic valuation in the form of a discounted cash flow model. A relative valuation through a comparable company analysis was also conducted, although this resulted in a wildly different share price, and | The Stockhub users estimate that the expected return of an investment in EasyJet plc over the next five years is '''positive 8.5%'''. This value was arrived at through the use an intrinsic valuation in the form of a discounted cash flow model. A relative valuation through a comparable company analysis was also conducted, although this resulted in a wildly different share price, '''and further investigation is required to refine the model.''' | ||
Assuming that a suitable return level of five years is 10% per year (based of the S&P 500 returns) and EasyJet achieves its return level of positive 8.5%, then the company can be considered 'undervalued'. | Assuming that a suitable return level of five years is 10% per year (based of the S&P 500 returns) and EasyJet achieves its return level of positive 8.5%, then the company can be considered 'undervalued'. | ||
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# Comparing key financial metrics of the company to other similar investment | # Comparing key financial metrics of the company to other similar investment | ||
Research has suggested that to estimate the expected return of an investment over a long-term investment horizon, a discounted cash flow model provides an accurate projection. For completeness a comparable company analysis has been conducted, however the accuracy of the analysis is limited due to the fact that | Research has suggested that to estimate the expected return of an investment over a long-term investment horizon, a discounted cash flow model provides an accurate projection. For completeness a comparable company analysis has been conducted, however the accuracy of the analysis is limited due to the fact that '''WHY''' | ||
|- | |- | ||
|Financial Projections | |Financial Projections | ||
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===Discounted Cash Flow Model=== | ===Discounted Cash Flow Model=== | ||
{| class="wikitable" | {| class="wikitable" | ||
| colspan=" | | colspan="16" |Current Share Price: £4.46 | ||
|- | |- | ||
!''£ million'' | !''£ million'' | ||
! colspan="9" |''Historical'' | ! colspan="9" |''Historical'' | ||
! colspan="5" |''Projected'' | ! colspan="5" |''Projected'' | ||
! | |||
|- | |- | ||
! | ! | ||
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!2026 | !2026 | ||
!2027 | !2027 | ||
!Notes | |||
|- | |- | ||
! colspan=" | ! colspan="16" |Income Statement | ||
|- | |- | ||
|Revenue | |Revenue | ||
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|10212 | |10212 | ||
|11029 | |11029 | ||
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|- | |- | ||
|''% growth'' | |''% growth'' | ||
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|5% | |5% | ||
|8% | |8% | ||
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|- | |- | ||
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|7783 | |7783 | ||
|8405 | |8405 | ||
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|- | |- | ||
|''% of revenue'' | |''% of revenue'' | ||
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|76% | |76% | ||
|76% | |76% | ||
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|- | |- | ||
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|2429 | |2429 | ||
|2623 | |2623 | ||
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|239 | |239 | ||
|258 | |258 | ||
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|- | |- | ||
|''% of revenue'' | |''% of revenue'' | ||
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|2% | |2% | ||
|2% | |2% | ||
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|- | |- | ||
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|390 | |390 | ||
|421 | |421 | ||
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|- | |- | ||
|''% of revenue'' | |''% of revenue'' | ||
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|4% | |4% | ||
|4% | |4% | ||
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|27 | |27 | ||
|29 | |29 | ||
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|''% of revenue'' | |''% of revenue'' | ||
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|0.3% | |0.3% | ||
|0.3% | |0.3% | ||
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|- | |- | ||
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|676 | |676 | ||
|730 | |730 | ||
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|- | |- | ||
|% of revenue | |% of revenue | ||
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|7% | |7% | ||
|7% | |7% | ||
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|1438 | |1438 | ||
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|1185 | |1185 | ||
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|1487 | |1487 | ||
|1606 | |1606 | ||
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|195 | |195 | ||
|211 | |211 | ||
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|- | |- | ||
|''Effective tax rate'' | |''Effective tax rate'' | ||
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|18% | |18% | ||
|18% | |18% | ||
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|902 | |902 | ||
|974 | |974 | ||
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Line 1,045: | Line 1,082: | ||
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|- | |- | ||
! colspan=" | ! colspan="16" |Cashflow | ||
|- | |- | ||
|D&A | |D&A | ||
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|390 | |390 | ||
|421 | |421 | ||
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|- | |- | ||
|''% of revenue'' | |''% of revenue'' | ||
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|4% | |4% | ||
|4% | |4% | ||
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|- | |- | ||
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| -1266 | | -1266 | ||
| -1367 | | -1367 | ||
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|- | |- | ||
|''% of revenue'' | |''% of revenue'' | ||
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|12% | |12% | ||
|12% | |12% | ||
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|- | |- | ||
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| -233 | | -233 | ||
| -252 | | -252 | ||
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|- | |- | ||
|% of revenue | |% of revenue | ||
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| -2% | | -2% | ||
| -2% | | -2% | ||
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|- | |- | ||
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|'''247''' | |'''247''' | ||
|'''259''' | |'''259''' | ||
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|} | |} | ||
{| class="wikitable" | {| class="wikitable" |