Stock Review: Thomas Cook

Tours and travel companies like Thomas Cook have recently been in the lime light. If you see the price movement of Cox & Kings , Thomas Cook is directly comparable with that. It may be smaller in size than Cox & Kings, but it has always ruled at a high PE multiple.

For December 2010, the company posted a top line of Rs 310 crore with EPS close to Rs 2.25. Looking at their first half results, they have posted a topline of Rs 185 crore. So I think the company should be able to post an EPS of Rs 3 plus this year, which translates into a PE multiple of about Rs 16-16.5. Apart from this, the company is debt free which is a very good point.

Another thing with this stock is that we have been hearing about the possibility of delisting at frequent intervals. Overseas promoters hold 77% stake in the company, so that is an extra trigger. Another factor is that the stock has corrected a lot in the last six months. It used to rule at Rs 70-75, but is now ruling below Rs 50, close to about Rs 46.

So if somebody buys this stock at current levels, he can expect the price to go up to Rs 60-65 on a pure fundamental basis. If we have the delisting news getting triggered again, the share can move to Rs 75. So it is a very good stock with a time horizon of 6-12 months.