Is Flight Centre’s Stock set to rise?

The Flight Centre stock price (ASX:FLT) has started this year almost exactly the same as it started last year, however the more important issue is whether the business has changed.

Investors appeared to see the outlook of Flight Centre positively at the beginning of 2018, with the share price rising over 40% to a high of $70.53, however it then fell back down to where it all started at $42. With a record underlying profit of $384.7m, 2018 saw Flight Centre pay its shareholders a fully franked dividend of $1.67, which at the current stock price has a yield of over 4%.

The reason for the recent decline in the Flight Centre stock price could be due to new allegations that Flight Centre has been underpaying staff and encouraging a culture of ripping off their customers. The Sydney Morning Herald reported that NAB has dropped Flight Centre as its travel provider after it discovered they had been overcharged.

At the last AGM, Flight Centre management have blamed the Australian sector of the business for a weak outlook for 2019, with the full year profit expected to grow between 1.4% and up to 9.2%. Although the business is expected to experience growth, with management now looking for high growth acquisitions, it may be best to wait for the release of the half year report in February. This should give investors a better understanding of any impact from the staff underpayment and poor culture allegations along with the impact of any acquisitions.

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