Ryanair Holdings plc, together with its subsidiaries, provides scheduled-passenger airline services in Ireland, the United Kingdom, Italy, Spain, Germany, and other European countries. It is also involved in the provision of various ancillary services, such as non-flight scheduled and Internet-related services; in-flight sale of beverages, food, duty-free, and merchandise; and marketing of car hire and accommodation services, and travel insurance through its website and mobile app. In addition, the company offers aircraft and passenger handling, ticketing, and maintenance and repair services; and markets car parking, fast-track, airport transfers, attractions, and activities on its website and mobile app, as well as sells gift vouchers. As of June 30, 2022, it had a principal fleet of approximately 483 Boeing 737 aircrafts and 29 Airbus A320 aircrafts; and offered approximately 3,000 short-haul flights per day serving approximately 225 airports. Ryanair Holdings plc was founded in 1985 and is headquartered in Swords, Ireland.
Valuation
Discounted Cash Flow Analysis
Historical Cash Flows:
Ryan Air's annual free cash flows from the past 10 years[12]:
| Year | Annual Free Cashflow (£ Mn) |
| 2023 | 2 063.22 |
| 2022 | 1 010.68 |
| 2021 | (-3 072.54) |
| 2020 | 831.96 |
| 2019 | 545.19 |
| 2018 | 892.85 |
| 2017 | 523.90 |
| 2016 | 1 133.79 |
| 2015 | 1 143.06 |
| 2014 | 722.26 |
| 2013 | 918.44 |
| 2012 | 1 006.38 |
| 2011 | (- 146.75) |
| 2010 | 52.45 |
| 2009 | 36.00 |
Projected Cash Flows:
Projected cash flow values for the next 10 years, based on an earnings growth prediction rate of 12.3%[13]:
| Year | Projected cash flow (£Mn) |
| 2024 | 2 317.00 |
| 2025 | 2 601.99 |
| 2026 | 2 922.03 |
| 2027 | 3 281.44 |
| 2028 | 3 685.06 |
| 2029 | 4 138.32 |
| 2030 | 4 647.33 |
| 2031 | 5 218.96 |
| 2032 | 5 860.89 |
| 2033 | 6 581.78 |
Determining a Discount Rate:
A WACC value was calculated as follows:
UK 10 Year Government Bond Yield = 4.43% (government data)
Beta value = 1.45[14]
Assumed market return premium = 6% (government data)
WACC = [risk-free rate] + [beta value * assumed market return premium]
WACC = [4.43%] + [1.45 * 6%]
WACC = 13.13%
Present value of predicted future cash flows:
The present value of each predicted cash flow (over the next 10 years), after the discount rate had been applied as follows:
Present value of cash flow = { predicted cash flow } / { (1 + WACC)^(number of years) }
| Year | Present value of predicted cash flow (£Mn) |
| 2024 | 2 048.08 |
| 2025 | 2 033.06 |
| 2026 | 2 018.14 |
| 2027 | 2 003.33 |
| 2028 | 1 988.64 |
| 2029 | 1 974.05 |
| 2030 | 1 959.56 |
| 2031 | 1 945.19 |
| 2032 | 1 930.92 |
| 2033 | 1 916.75 |
Net present / intrinsic value of Ryan Air:
The net present value was calculated by summing the present values of predicted cash flows over the next 10 years:
Net present value = £19 817.71 Mn (£19.82 Bn)
Comparison with present market cap of Ryan Air:
Given that the net present value (£19.82 Bn) calculated from the DCF analysis is less than the current market cap of Ryan Air (£18.98 Bn - as of October 2023[15]) - it is possible that Ryan Air is potentially undervalued, calling for a sensitivity analysis to be carried out.
References and notes
- ↑ Aldous, Richard (2013). Tony Ryan: Ireland's Aviator. Gill & Macmillan Ltd. p. 80. ISBN 978-0-7171-5781-5.
- ↑ "Ryanair to relaunch at Billund Airport with 26 destinations". The Local. 5 May 2021.
- ↑ 3.0 3.1 3.2
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- ↑ "Ryanair to start flying from Arlanda this autumn". The Local. 6 May 2021.
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- ↑ https://www.macrotrends.net/stocks/charts/RYAAY/ryanair-holdings/free-cash-flow
- ↑ https://simplywall.st/stocks/ie/transportation/ise-rya/ryanair-holdings-shares/future#:~:text=Ryanair%20Holdings%20is%20forecasted%20to,be%2025.3%25%20in%203%20years.
- ↑ https://finance.yahoo.com/quote/RYAAY/?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAA-QsnB5Z3NE6_hbXttVYrUnEYFEWtxrdExBHRP0wG2Rwy_Q5T0mlSLNPF2WwFhQbDYfevMryfNXYe8P_oYpm8Xt7ytyiQCF8KpRHed-kXXUK8BorxHOIxb-yyG92X5Dx2IfOOw3sPZlEWgKeH5FetsTHRtMu9XR-g5kdP4aoX-1
- ↑ https://companiesmarketcap.com/ryanair/marketcap/#:~:text=Market%20cap%3A%20%2422.31%20Billion,cap%20according%20to%20our%20data.