Fundamental Investment Pitch - Easyjet

We don't just trade here at FoundryStrat - we like to find longer-term stocks to buy. One has come up on our various screens that we've decided to buy.

Remember, this is not a buy recommendation or advice. Do your own homework.

Warren Buffett famously said, don't buy Airlines. That's fine and we'd generally agree that over the longer term they can be terrible businesses. But at certain times, you look at a company which is making good profits and looks way too cheap. Easyjet is this...Let's dig into it.

easyJet plc (EZJ LN)

Price: 361pStance: BuyPositioning: Contrarian / Recovery

🎯 Investment Thesis

easyJet is trading at a depressed multiple due to short-term macro fears, while the underlying business has structurally recovered.

The recent weakness, driven by geopolitical tensions (Iran) and the implied impact on fuel costs, looks transient, not structural.

Meanwhile:

• Earnings have normalised post-COVID

• Margins are steadily rebuilding

• The balance sheet has flipped to net cash

• The market is pricing risk, not reality

📊 Fundamental Inflection

1) Revenue fully recovered—and still growing

• Revenue:£1.5bn (2021) → £10.1bn (2025) → £11.9bn (2027E)

• ~27% CAGR recovery profile

  
  

This is no longer a “recovery story”, it’s a growth + normalisation story

2) Profitability back and improving

• EPS: 69.8p (2025)

• Consistently profitable over the last 3 years.

Clear operating leverage coming through

3) EPS power vs valuation

• Normalised EPS: so that 69.8p at the current price;

• Current P/E: ~5x

That’s the crux:

• A structurally profitable airline

• Trading like a distressed asset

Even modest re-rating to:

• 8–10x earnings → implies ~550–700p valuation range

4) Balance sheet transformation

• Net debt: £1.1bn → £600m net cash (2025)

This is critical:

• Removes solvency risk

• Enables dividends + reinvestment

5) Capital return is back

• Dividend restored and growing:

  • 4.5p → 13.2p → 15.2p (2027E)

• Yield: ~4%

• Cover: ~5x

👉 Well-covered, not stretched

⚠️ Why the opportunity exists

The market is focused on:

• Rising oil prices (Iran tensions)

• Airline cyclicality

• Macro uncertainty

But:

👉 These are input-driven, short-term pressures

They do not change:

• Demand for short-haul travel

• easyJet’s cost base advantage

• Its improved financial position

📈 What needs to go right

• Fuel prices stabilise (or are passed through via pricing)

• Continued load factor strength into summer

• Margin progression continues toward high single digits

🚀 Upside Case

If the market re-rates EZJ to a more normalised multiple:

• EPS ~65–70p

• P/E 8–10x

👉 Fair value: 550p – 700p (50–90% upside from current levels)

🧾 Bottom Line

easyJet is:

• Financially repaired

• Operationally improving

• Paying a dividend

• Trading on ~5x earnings

Yet priced as if the business is still in distress.