 Good day, fellow investors. Ryanair is a great business and I have been following that business for a few years now but it was always a little bit expensive. When you have a CEO that says that for five quids, for a fiver, for five pounds, he will wipe your ass personally or when you see their conference call, how they print out the logo to put it on an old brick of a laptop, it means that they are really, really focused on costs and that's a management you want to have on your side. And now that the stock has fallen 50% since its highs a year ago, just a year ago, I said okay, let's do a dig deep into Ryanair, put it on my watch list, put it on my covered stock list and then see whether it is time to buy now, whether it is time to wait still a little bit and see where are we in evaluation of Ryanair. So in this video I'll value Ryanair, I'll show the risks, show the rewards, the business model, compare it to the competition and why I think Ryanair is now a stock to watch. Let's start, not buy yet but the opportunities might come over the next year or two. Let's start. So as I said Ryanair has been an amazing business, 10x over the last 20 years as the management did really, really good in growing the business but look at the volatility, 2007, 2009 huge drop, 2015 there was a big drop and then 2017-18 till now again what more than 50% drop in stock prices. To value Ryanair we have to look at the current situation full of issues, how those issues affect the short and long-term outlook, whether Ryanair has a mode, a competitive advantage, where we are in the business cycle for airlines in Europe, Ryanair stock price compared to a long-term earnings model and general and specific risks. The recent news on Ryanair has been mostly negative and that's why the stock price dropped. We have unionization and strikes that led to huge staff cost increases I believe 28%, higher oil prices have influenced their cost and they still expect 400 million in more costs in 2020. The competition has been constantly increasing, Germany has large overcapacity, is low hand size, initiating a price war by selling tickets below cost with its Eurowing subsidiary. Air traffic control in Europe is also an issue because there is much more traffic but still the same number of staff so there is understaffing and that should increase costs in the future. They recently acquired LaudaMotion that had 140 million loss for the year and the situation is still chaotic. The Boeing Max aircraft issue has delayed delivery of five aircrafts ordered so not saving on the costs there. There will be more failures, airline failures this winter does book your trips only with good companies. On the other hand Ryanair this indicates there will be a stable supply of pilots and staff. Guidance is flat for profits, again not good when you are a growth stock between 750-950 million on lower prices, 8% passenger growth and if there is no Brexit of course and other issues that might plague the company in the next year. So all those issues plague the stock that's the reason why it went down but the stock really reflects on news. A year and a half ago the news were positive and the stock exploded overvalued for me but I kept an eye on it and now I'm looking okay let's do a deep dive and see Ryanair due to all the issues had to lower even their fares from 39 euros to 47 euros so 6% decline in fares which affects again revenue but now we have to see it how does that affect the short and long-term outlook. We discussed the bed but things are not that bad after all. If there are bankruptcies it means that there will be more free slots. Ryanair has a cost competitive advantage so they will take over companies like they did acquire the rest of Lauda for what was it 50 million euros or something so very cheaply they can get to more revenue more scale with their cost with their management. So really if they can incorporate companies like Lauda Motion into their business model it's a big win and also what the CEO said they hope for higher oil prices so that many other airline corporations in Europe go bankrupt so that in the future it will be easier for Ryanair. So it's very interesting how Ryanair puts win-win-win situations everywhere higher oil prices less competition win lower oil prices more money now the market usually focuses on now now and now on the recent news and that's reflected in the stock price. If we look at capital returns from Ryanair over the last 10 years it's 6.8 billion so what 70% of the stock price has been returned to shareholders they are very opportunistic they are having now a 700 million buyback plan to take advantage of the low stock price so they you could say that Pabrai would call this an uber cannibal stock. The management knows the price environment is weak will continue to be weak and they say shareholders should expect more pain over the next year two years and here is what I say if there is more pain coming then the stock price might further suffer so I'm just holding a little bit before buying and looking at the situation and then I'll see whether to buy in a year in two years in six months you never know but usually the market is short term so if there is more pain it's probably it's likely that the stock price will suffer more which is indication that there is still not a margin of safety. If we look at Ryanair's competitive advantage it is really incredible Wizzare will not be an independent airline for long there will be constant validation in the market so we have to compare it to EasyJet and we see a huge competitive cost advantage and if we look at stock fair prices there is a big mark big part of the market that only cares about the cheapest fair also where Ryanair really wins the scale ownership and maintenance the airport handling as they are using ex-military airports in the middle of nowhere around Europe. Further their coverage is incredible they can scale that they can take advantage of that they want to grow further in Ukraine middle east so very very interesting their projects and they want to grow to 200 million by fiscal year 24. Now this is very interesting they have market share significant numbers but here you have to also differentiate between the market share of total airlines of or of those buyers that focus on cheap prices so the real market share is much much higher for Ryanair. When it comes to business analysis the best thing to do is to go to Peter Barklin for niche master funds and he has been kind to share his global airline industry presentation with me and I'll use some slide to better explain what Ryanair is and could become. Here we have the demand curve in real life there are a few customers who are willing to pay a lot more than most which means that Ryanair really targets the largest part of customers that are really fair sensitive so it's something that Ryanair is focused on they don't have the price insensitive customers or they even have they just those customers just want to get from A to B but there is a huge number of potential customers that focuses on Ryanair if the price is extremely low and then those that really buy low as said Ryanair very cheap just this from the 2019 conference call it's crazy how it how they do it but they keep costs low. When it comes to the European market consolidation companies will go bankrupt pricing is really low European aircraft fair fairs are 25% of the current fairs in the United States so at some point this is artificially low at some point those fairs will have to go up companies will go bankrupt only the strongest only the lowest cost will survive and Ryanair will probably be one of the five airline carriers for that will survive over the next 10 years like it was the case in the United States when Buffett started buying airlines a few years ago when what those were cheap because the consolidation happened and perhaps it's time for airlines now to deliver good returns like Ryanair has been doing and like in the US has been the case lately. If we look at the stock price the market cap is currently 11 billion euros profits over the past five years have been good and around one billion on average management has guided for profits between 700 and 900 million let's take 700 million over the next two years after two years if there is no recession we can assume profits to go to one billion as the market consolidates or we could see profits to go to zero if we have Brexit recession. However what is a given is the trend Ryanair will reach 20 million passengers per year in 2024 that that is growth of 25 percent affairs in Europe increased by then I would assume a 50 percent increase in revenues add an acquisition and we could see even 12 billion in revenues perhaps 15 billion depending on what is acquired on 15 billion in revenue with average history gross margin of 25 percent net income would be 2 billion so they continue with buybacks earnings could be at three euros and the stock price at 30 if we have a 10 price earnings ratio so if it happens over the next seven years it's 16 percent if it happens over 10 years it's an 11 percent return. However if we look at the stock price if profits suffer for another year or two they go to 400 million investors will attach a price earnings ratio of 1015 and the market cap will go down to 7 billion so there is still a lot of room for the stock to go down if we look at the returns we are now at 10 years conservative return of 11.6 percent I want a 15-20 percent return from my investment so I'll wait for stock the stock prices to fall another 30 percent perhaps it will perhaps it want if not I'll buy something else. There are always risks a plane crash if a plane crashes that's a big risk for a company especially a company like Ryanair and that's why that's perhaps why Buffett diversified across four U.S. airlines nevertheless there is Brexit there is a European recession higher taxes the European Commission might say okay Ryanair you are too competitive you should allow EasyJet to put 10 passengers in your plane or something like that sounds crazy but it can happen in Europe so there are also a lot of risks so I would even go for 20 percent returns on investment from such a company really buy when things are bad things are not yet bad enough but might come I'm going to put this on my watch list and follow the conference calls see what's going on in the environment just an example of what you hear on the conference call regarding Boeing and Airbus the CEO of Ryanair said how new aircraft prices pricing is high and they are waiting for a downturn which means that for Boeing and Airbus investors the prices will be lower somewhere in the future and this also means lower profits lower margins for Boeing and Airbus and lower stock prices so that's something that you learn by reading constantly about stocks if you don't have the time to do that but you would like to invest in good businesses at fair prices you can simply follow my stock market research platform full-time research from me and I put everything that I do there who wants to read the research can read all the reports who just wants the transaction gets an email 20 minutes after the transaction is made so you can just read why I did some transaction it saves you a lot of time it costs you less than one dollar per day and you have me practically working for you for one dollar for less than one dollar a day doing research analyzing stocks following conferences and doing everything that has to be done to make sound low risk hopefully high return investments check it out if you fancy to save time and get more information about investments like this research on Ryanair thank you for watching looking forward to your comments and I'll see you in the next video