Shares in On the Beach Group (OTB:LON) have skyrocketed recently. Over the last month, the British online travel company’s share price has risen more than 40%. Can this under-the-radar small-cap growth stock continue to deliver for investors in 2025 and beyond? Let’s take a look.
What does On the Beach do?
On the Beach Group is one of the UK’s largest online package holiday businesses. Headquartered in Manchester, it offers a broad range of package holidays for consumers as well as services that enable high street travel agents to sell packaged holidays to customers.
On the Beach was founded in 2004, and it has been listed on the London Stock Exchange (the main market) since 2015. At its current share price of 226p, the company has a market capitalisation of around £380 million.
![On The Beach Group Plc share price, charts, analysis and forecast [OTB]](https://goodmoneyguide.com/wp-content/uploads/2024/12/On-The-Beach-Group-Plc-share-price-charts-analysis-and-forecast-OTB.png)
Why has the On the Beach share price jumped?
On 3 December, On the Beach posted its full-year results for the financial year ended 30 September 2024. And the results were strong, which pushed the company’s share price up significantly.
For the period, revenue increased 14% to £128.2 million. Meanwhile, adjusted profit before tax increased 25% to £31.0 million.
On the back of these results, the company declared total dividends of 3.0p per share for the year versus 0p per share the year before. It also announced a £25 million buyback.
Looking ahead, the company said that winter bookings are at record levels. It also said that it expects summer 2025 to be ‘significantly ahead’ of 2024.
Looking further out, the company is aiming for adjusted profit before tax of £85m in the medium term. That would represent an increase of 174% from the financial year just passed.
The bull case
There’s a lot to like about On the Beach shares right now, in my view.
For starters, consumers continue to prioritise spending on travel. It seems that after the pandemic, people want to spend their money on experiences rather than goods. This backdrop should support top and bottom-line growth going forward. For the current financial year, analysts expect revenue and earnings per share to grow 50% and 28% respectively.
Secondly, the company’s financials are attractive. Gross margin is very high (95% last year). And the balance sheet is rock-solid. At 30 September, the company had cash of £96 million on its books. The company is also paying dividends (the yield is about 1.3%) and doing share buybacks.
Third, the valuation is low. Currently, the forward-looking price-to-earnings (P/E) ratio is just 12.7. So, there’s room for a rerating. It’s worth noting that Panmure Liberum has a price target of 300p. That’s 33% above the current share price.
Risks
There are a few risks to consider though.
One is the company’s lack of geographic diversification. Today, the company predominantly serves UK consumers. This isn’t ideal. Looking ahead, the outlook for the UK economy isn’t great, meaning that Britons’ disposable income could dry up.
Another risk is competition. Travel is a competitive industry and it’s hard to know if this company has a genuine competitive advantage. In the future, it may have to spend significant amounts of money on marketing. This marketing spend could eat into profits.
On the Beach Outlook
My view on On the Beach shares
Weighing everything up, however, I’m bullish on On the Beach, given its valuation and financials. I think the shares have the potential to do well in 2025 and beyond.
Pros
- Consumers are spending on travel
- Strong financials
- Attractive valuation
Cons
- UK consumer risk
- Operates in a competitive industry
- Low dividend yield
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Outlook
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Overall
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Based in London, Edward is a distinguished investment writer with an extensive client portfolio comprising a diverse array of prominent financial services firms across the globe. With over 15 years of hands-on experience in private wealth management and institutional asset management, both in the UK and Australia, he possesses a profound understanding of the finance industry.
Before establishing himself as a writer, Edward earned a Commerce degree from the prestigious University of Melbourne. Complementing his academic background, he holds the esteemed Investment Management Certificate (IMC) and is a proud holder of the Chartered Financial Analyst (CFA) qualification.
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