The market remains unenthused about holiday seller On The Beach (OTB), with its share price stuck in the mud. At 102.43p, the shares are down 65% year-to-date and 83% lower than the pre-pandemic high of 615p in April 2018.

A trading update on 25 October said full-year pre-tax profit was in line with market expectations, five-star holiday sales were doing very well and investment in the business puts it in a stronger position once the travel market properly recovers.

This doesn’t seem to be enough to convince investors that the shares are worth buying. There are valid concerns that a recession might negatively impact demand for foreign holidays. However, one could also argue so much bad news is priced into the stock that now is a good time to buy.

Numis forecasts pre-tax profit will more than double from £14.4 million in the year to September 2022 to £29.3 million in 2023, and then hit £42.2 million in 2024. Despite these attractive earnings growth estimates, the shares are trading on a mere two times EV/EBITDA (enterprise value to earnings before interest, tax, depreciation and amortisation).

That’s an absolute bargain if you take a long-term view that holiday demand will recover and that On The Beach will be a key player in the market. We certainly do. A bit of patience now could reap big rewards down the line.

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