Ryanair Holdings plc and its subsidiaries stand as a prominent provider of scheduled passenger airline services across various European nations, including Ireland, the United Kingdom, Italy, Spain, and Germany. Beyond its fundamental airline operations, the company delves into a myriad of ancillary services, offering non-flight scheduled and Internet-related services, in-flight sales of beverages, food, duty-free items, and merchandise. Additionally, it facilitates the marketing of car hire, accommodation services, and travel insurance through its digital platforms – its website and mobile app.
Moreover, Ryanair extends its reach by offering a comprehensive suite of services that encompasses aircraft and passenger handling, ticketing, and essential maintenance and repair services. The company also endorses a variety of airport-based services and travel extras like car parking, fast-track, airport transfers, and local attractions and activities, all accessible via its online platforms. Gift vouchers are also available for purchase.
As of June 30, 2022, Ryanair showcased a robust principal fleet, comprising approximately 483 Boeing 737 aircraft and 29 Airbus A320 aircraft. The airline facilitates roughly 3,000 short-haul flights daily, connecting around 225 airports and steadfastly serving its vast customer base. Established in 1985, Ryanair Holdings plc proudly anchors its headquarters in Swords, Ireland, persevering as a pivotal player in the European airline industry.
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.