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The TUI share price is falling. Here’s what I’m doing

first_img Our 6 ‘Best Buys Now’ Shares I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Image source: Getty Images FREE REPORT: Why this £5 stock could be set to surge The TUI share price is falling. Here’s what I’m doing Are you on the lookout for UK growth stocks?If so, get this FREE no-strings report now.While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.And the performance of this company really is stunning.In 2019, it returned £150million to shareholders through buybacks and dividends.We believe its financial position is about as solid as anything we’ve seen.Since 2016, annual revenues increased 31%In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259Operating cash flow is up 47%. (Even its operating margins are rising every year!)Quite simply, we believe it’s a fantastic Foolish growth pick.What’s more, it deserves your attention today.So please don’t wait another moment. Enter Your Email Address See all posts by Roland Headcenter_img Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Roland Head | Monday, 29th March, 2021 | More on: TUI Simply click below to discover how you can take advantage of this. The TUI (LSE: TUI) share price has fallen by more than 20% in a month, as fears grow that Covid-19 travel restrictions will last through the summer.However, TUI shares are still up 55% on over the last year. Investors who bought the stock as markets crashed last March have done well. Conventional market wisdom says investors should run their winners, but is TUI still cheap enough for me to buy? I’m not so sure.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Why I like TUITUI’s share price is still 40% below January 2020 levels. For that money I can get exposure to Europe’s largest travel company. TUI operates in all of Europe’s most popular holiday markets, so I think it should benefit immediately when demand starts to return.History suggests to me that sunseekers in Northern European countries such as the UK and Germany will get tired of staycationing. They’ll want to get back to places where the sun’s a bit more reliable.I’m confident that holiday demand will return to normal after the pandemic. In February, TUI said it was planning to operate at 80% of 2019 capacity this summer. I think that might be a little optimistic, but I’m sure we’ll see holiday activity return to normal in 2022.This is what worries meI can see two main problems with buying TUI shares as a Covid-19 recovery play. The first is that TUI’s sprawling empire of hotels, airlines and cruise ships means its operating expenses are quite high. In 2019, the company’s reported revenue of €18,900m, but its operating profit was just €769m. That’s an operating profit margin of only 4%.If TUI’s assets are open but less busy than usual, then profit margins could be even lower, despite cutting costs.My second worry is debt. TUI has borrowed a lot of extra money to get through the pandemic. The group’s net debt rose from €5.1bn at the end of 2019 to €7.2bn at the end of 2020.Over the same time, TUI’s share price drop means that its market-cap — the value of all its shares — has fallen from around €5.8bn to €3.9bn.One common way to value a business is to add together its net debt and market-cap. This is known as enterprise value. It shows the total cost of the company for a potential buyer. My sums tell me that TUI’s enterprise value is almost the same today as it was at the end of 2019.TUI share price: I’m staying awayIn my opinion, the risks facing TUI’s business today are bigger than they were at the end of 2019. To invest, I’d want to have a margin of safety in case of further problems.I don’t think TUI’s share price is low enough to provide that kind of protection. With travel restrictions likely to stay in place across Europe for some time yet, I reckon TUI looks fully-priced.I’ll take another look later this year but, for now, I’m staying away. Get the full details on this £5 stock now – while your report is free.last_img read more

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