In 2024, the World Travel & Tourism Council (WTTC) projects a record-breaking year for Travel & Tourism, with the sector’s global economic contribution expected to reach an all-time high of $11.10 trillion. With the global sector surpassing its pre-pandemic prosperity, WTTC anticipates that 142 out of the 185 countries will exceed their previous national records.
Thus, it could be opportune to invest in fundamentally sound travel stocks. Let’s determine whether investors should add MakeMyTrip Limited (MMYT) to their watchlist.
MMYT, an India-based online travel company valued at $9.75 billion market cap, delivered outstanding financial and operating results for the fourth quarter of 2024. The company reported revenue of $202.89 million, beating analysts’ estimate of $198.95 million. Moreover, gross bookings rose by 23% year-over-year to $2.04 billion.
The travel service provider’s adjusted margins for Air Ticketing, Hotel and Packages, and Bus ticketing experienced a double-digit year-over-year increase. Furthermore, MMYT posted final-quarter earnings per share of $1.26, exceeding the analysts’ expectations of $0.16.
Rajesh Magow, CEO of MakeMyTrip, said, “Our strategy to serve millions of our customers and first-time travellers through a comprehensive portfolio of travel and ancillary products with personalised experiences is yielding results. It has helped us deliver strong growth in a quarter that is typically a seasonally slower period for leisure travel.”
“We are pleased that we have bounced back stronger from the COVID-19 pandemic by posting our best-ever financial performance during fiscal year 2024 in terms of both Gross Bookings and Profit,” Magow added.
Shares of MMYT have gained 16.3% over the past month and 92.2% in the past six months to close the last trading session at $88.78.
Let’s look at factors that could influence MMYT’s performance in the upcoming months.
Robust Financials
For the fourth quarter that ended March 31, 2024, MMYT’s total revenue increased 36.6% year-over-year to $202.89 million. Its adjusted operating profit came in at $32.43 million, up 70.4% from the prior year’s quarter. Its net profit rose 60.1% from the year-ago value to $36.92 million, and its adjusted EPS was $0.38, an increase of 81% year-over-year.
Additionally, as of March 31, 2024, MMYT’s cash and cash equivalents stood at $327.07 million, compared to $284.02 million as of March 31, 2023.
Impressive Historical Growth
Over the past three years, MMYT’s revenue has grown at a CAGR of 68.5%. The company’s total assets have increased at a CAGR of 8.2% over the same period, and its tangible book value has improved at a 44% CAGR. Furthermore, the company's levered free cash flow has grown at a CAGR of 19.2% over the same timeframe.
Mixed Analyst Expectations
Analysts expect MMYT’s revenue and EPS for the first quarter (ended June 2024) to grow 24.2% and 88.2% year-over-year to $246.25 million and $0.32, respectively. For the fiscal year ending March 2025, Street expects MMYT’s revenue to grow 20.3% from the prior year to $983.43 million.
However, the travel company’s EPS for the ongoing year is expected to decrease by 32.2% year-over-year to $1.18. In addition, analysts expect MMYT’s revenue and EPS for the fiscal year 2025 to increase 20.8% and 50.5% year-over-year to $1.19 billion and $1.78, respectively.
Mixed Profitability
MMYT’s trailing-12-month gross profit margin of 53.65% is 45.8% higher than the 36.81% industry average. Also, the stock’s trailing-12-month levered FCF margin of 14.1% is 153.6% higher than the industry average of 5.55%. However, its trailing-12-month asset turnover ratio of 0.52x is 47.9% lower than the industry average of 0.99x.
Further, the stock’s trailing-12-month ROCE and ROTA of 21.9% and 13.06% are 82.6% and 208.4% higher than the industry average of 11.99% and 4.23% respectively. However, its trailing-12-month ROTC of 3.84% is unfavorably compared to the industry average of 6.25%.
Stretched Valuation
In terms of forward non-GAAP P/E, MMYT is trading at 56.82x, 278.3% higher than the industry average of 15.02x. The stock’s forward EV/Sales multiple of 9.46 is 711.1% higher than the industry average of 1.17. Likewise, its forward Price/Cash Flow of 78.69x is considerably higher than the industry average of 9.32x.
Moreover, the stock’s forward Price/Sales multiple of 9.85 is significantly higher than the industry average of 0.87. Its forward EV/EBITDA of 52.94x is 463.4% higher than the industry average of 9.40x.
POWR Ratings Reflect Uncertainty
MMYT’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. MMYT has a B in Growth, in sync with its solid financial performance in the last reported quarter and outstanding historical growth. Also, the stock has a C grade for Quality, justified by its mixed profitability.
On the other hand, the stock has an F for Value, consistent with its higher-than-industry valuation.
Within the Internet industry, MMYT is ranked #46 out of 53 stocks.
Beyond what I have stated above, we have also given MMYT grades for Sentiment, Stability, and Momentum. Get all MMYT ratings here.
Bottom Line
MMYT surpassed analysts’ estimates for revenue and earnings in the fourth quarter of 2024. The company’s strategy to serve millions of its customers and first-time travelers through its diversified portfolio of travel and ancillary products with personalized experiences yields solid financial and operating results.
However, given MMYT’s elevated valuation and enhanced volatility (60-month beta of 1.28), waiting for a better entry point in this stock seems wise now.
How Does MakeMyTrip Limited (MMYT) Stack Up Against Its Peers?
Given its near-term uncertain prospects, the odds of MMYT outperforming in the weeks and months ahead are compromised. However, there are many industry peers with much more impressive POWR Ratings. So, consider these three A (Strong Buy) or B-rated (Buy) stocks from the Internet industry:
Yelp Inc. (YELP)
Travelzoo (TZOO)
Dingdong (Cayman) Ltd. (DDL)
To explore more A- and B-rated internet stocks, click here.
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MMYT shares were trading at $88.78 per share on Thursday morning, up $2.50 (+2.90%). Year-to-date, MMYT has gained 88.97%, versus a 16.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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