With strong employment supporting travel spending, the industry is poised to benefit from the pent-up demand. Therefore, let’s explore the fundamentals of quality travel stocks Genting Berhad (GEBHY), Travel + Leisure Co. (TNL), and Bluegreen Vacations Holding Corporation (BVH) to see if they are worth buying or not.
The tourism sector made a tremendous rebound in 2022 following the disastrous impact of the COVID-19 pandemic. According to new data from UNWTO, more than 900 million tourists traveled internationally in 2022, twice the number recorded in 2021 though still 63% of pre-pandemic levels.
Given the stronger-than-expected recovery, UNWTO’s Secretary-General Zurab Pololikashvili anticipates a strong year for the sector even in the face of diverse challenges, including the economic situation and continued geopolitical uncertainty.
So far this year, the data shows that travelers are unfazed by inflation and the drumbeats of a recession. According to NerdWallet's Travel Price Index, the overall cost of travel is up 11% over the past year, outpacing the overall 6% rate of inflation across the United States. Airline fares increased by 26.5%, and lodging grew by 7.4% from one year ago last month.
Travel demand is supported by sticky jobs and continuing wage growth. The U.S. economy added 311,000 jobs in February, higher than expectations of 205,000, while the unemployment rate grew to 3.6%.
Notwithstanding persisting macroeconomic difficulties, travel sector growth will likely remain healthy this year due to sustained pent-up travel demand. With that in mind, fundamentally strong travel stocks GEBHY, TNL, and BVH could be worth owning to garner substantial returns.
Genting Berhad (GEBHY)
Based in Kuala Lumpur, Malaysia, GEBHY is an investment holding and management company that engages in leisure, hospitality, gaming, and entertainment services. It operates through the following segments: Leisure and Hospitality; Plantation; Power; Property; Oil and Gas; and Investments and Others.
In terms of trailing-12-month, GEBHY’s levered FCF margin of 14.59% is 662.2% higher than the 1.91% industry average. Likewise, its trailing-12-month EBITDA margin of 32.59% is 185% higher than the industry average of 11.43%.
For the fiscal fourth quarter that ended December 31, 2022, GEBHY’s revenues increased 31.5% year-over-year to RM6.36 billion ($1.44 billion), while its gross profit came in at RM1.81 billion ($409.71 million), up 24.6% year-over-year. In addition, its adjusted EBITDA increased 18.3% from the previous-year quarter to RM1.90 billion ($430.16 million)
GEBHY’s consensus revenue estimate of $5.61 billion for the fiscal year ending December 31, 2023, represents an 11.1% increase year-over-year. Its revenue has grown at a CAGR of 1.2% over the past three years and at 2.3% CAGR over the past five years.
Shares of GEBHY have gained 2.7% over the past three months to close the last trading session at $4.93.
GEBHY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GEBHY is also rated B in Value and Stability. Within the B-rated Travel - Hotels/Resorts industry, it is ranked #4 of 22 stocks. To see additional POWR Ratings for Growth, Momentum, Sentiment, and Quality for GEBHY, click here.
Travel + Leisure Co. (TNL)
TNL, together with its subsidiaries, provides hospitality services and products in the United States and internationally. The company operates in two segments, Vacation Ownership; and Travel and Membership.
On March 8, TNL increased its quarterly dividend by 12.5% to $0.45 per share, payable to its shareholders on March 31, 2023. The company’s annual dividend of $1.80 yields 5.03% at the current price level. Its dividend payouts have increased at an 8.8% CAGR over the past five years.
The stock’s trailing-12-month EBIT margin of 19.04% is 147.4% higher than the 7.70% industry average. Also, its trailing-12-month levered FCF margin of 9.97% compares to the industry average of 1.91%.
For the fourth quarter of the fiscal year 2022 that ended December 31, TNL’s net revenues increased 3.3% year-over-year to $899 million. During the same period, the company’s gross VOI sale increased 20.6% year-over-year to $521 million, while its adjusted net income increased marginally year-over-year to $105 million. Also, its adjusted EPS stood at $1.30, up 9.2% year-over-year.
Analysts expect TNL’s EPS and revenue to increase 11.9% and 3.8% year-over-year to $0.77 and $839.57 million, respectively, for the fiscal first quarter (ending March 31, 2023). The stock has gained marginally over the past six months to close the last trading session at $35.81.
TNL’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
TNL has a B grade for Value and Quality. Out of the 22 stocks in the same industry, it is ranked #2. Click here to see the POWR Ratings of TNL (Growth, Momentum, Stability, and Sentiment).
Bluegreen Vacations Holding Corporation (BVH)
BVH markets and sells VOI and manages resorts in leisure and urban destinations, including Orlando, Las Vegas, Myrtle Beach, Charleston, and New Orleans.
On February 27, BVH announced the groundbreaking for the Bluegreen Mill Springs Lodge Resort in Pigeon Forge, Tennessee. The new lodge-style resort, due to open in 2024, is expected to generate substantial revenues while expanding the company’s footprint into new geographies.
“The planned design of the accommodations, along with the amenities such as the spa, are a direct response to the increasing expectations of our owners. We believe that once completed, Mill Springs Lodge will be added to the list of ‘must-visit’ resorts,” said Dusty Tonkin, Chief Sales & Marketing Officer of Bluegreen Vacations.
On March 20, the company paid a quarterly dividend of $0.20 per share on its Class A and Class B common stock, reflecting an increase of 33.3% from the previous quarter. Its forward annual dividend translates to a 3.13% yield on current prices, while its four-year average dividend yield is 0.81%. Its dividends have grown at 47.5% and 39.9% CAGRs over the past three and five years, respectively.
BVH’s trailing-12-month EBIT margin of 27.32% is 255% higher than the 7.70% industry average. Likewise, its trailing-12-month ROCE of 31.02% is 180.7% higher than the industry average of 11.05%.
BVH’s total revenue increased 17.2% year-over-year to $237.97 million in the fiscal fourth quarter (ended December 31, 2022). Its adjusted EBITDA attributable to shareholders increased 4.1% from the year-ago value to $32.24 million. Also, its total assets increased 15.5% year-over-year to $1.40 billion for the period that ended December 31, 2022.
Street expects BVH’s revenue to increase marginally year-over-year to $196.81 million in the fiscal first quarter (ending March 31, 2023). Its EPS is expected to increase 2.5% from the same period last year to $0.78. The company surpassed the EPS estimates in three of the trailing four quarters.
BVH’s EBITDA and net income have grown at 15% and 53.8% CAGRs over the past three years, while its EPS has grown at a 50.3 % CAGR over the same period.
Over the past six months, the stock has gained 50.8% to close the last trading session at $25.58.
BVH’s POWR Ratings reflect a promising outlook. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system. BVH also has a B grade for Value and Quality. Within the same industry, it is ranked #3.
Click here to see the additional POWR Ratings for BVH (Growth, Momentum, Stability, and Sentiment).
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GEBHY shares were trading at $5.14 per share on Tuesday afternoon, up $0.21 (+4.26%). Year-to-date, GEBHY has gained 3.45%, versus a 3.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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