A Simple Buy idea as easy as 123?

This relates to Easyjet (EZJ) the low cost airline - who reported some more positive traffic statistics today. So apart from that why do I suggest it is a buy idea? Well here are three easy reasons to support a buy case:

1. It should ultimately be a beneficiary of the recent decline in oil prices.
2. The weakness in the Euro could encourage more travel to and within Europe, particularly from the UK.
3. UK consumers are seeing their earnings pick up as perreports of these returning to pre crisis levels. Allied to this UK consumer confidence has also reached pre crisis levels (see chart below).
   

source: tradingeconomics.com

So three simple reasons why Easyjet might have some helpful tailwinds. in addition to this, it has been scoring well in the Compound Income Scores for a while now. It currently ranks in the top decile on the back of good value, dividend growth and financial security metrics (£913 million cash on the balance sheet at 31st December) plus a good recent estimate revision trend. On valuation metrics it looks reasonable with a PE of 12 to 13x, a forecast dividend yield of 3.4% and an estimated earnings yield of about 9%.

As you can see from the chart below they have come back recently by around 200 pence or 10% from their recent spike up to 1930 pence intra day and are consequently trading close to their 50 day moving average which has provided support for previous rallies in the last 6 months. It is worth noting that some of the recent fall will also reflect the fact that they went ex their full year 45.4 pence towards the end of February, which unusually is paid in one payment, probably reflecting the fact that they normally make a loss in their first half.

Summary & Conclusion
Easyjet appears to be a reasonable quality, albeit volatile business which is showing some good value and growth characteristics supported by some helpful economic developments which have led to earnings upgrades in the short term.
Longer term the shares have done exceptionally well since the economic crisis in 2008 and this may give some vertigo and
the share are quite volatile so it is always possible that there may be a better buying opportunity if markets suffer another wobble and the 200 day closer to 1500 might be a longer term support / target entry point on that basis although it may not get there of course, but at least you will not be missing out on any income by waiting given the annual payment is not due until February next year now.

Thus I'll leave you to decide if you want to get on board here or not. Talking of getting on board I am taking my own advice about the weakness of the Euro as I'm off for City break in Europe later this month and I'm flying Easyjet!

If you want to as well then you could check out this article to see when is the best time to book a flight.