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Investing.com -- Jet2 Plc’s (LON:JET2) shares may have risen sharply, but the stock continues to offer compelling value, analysts at RBC Capital Markets said in a note Monday.
The brokerage reaffirmed its “outperform” rating and raised its price target to £22 from £21, citing solid earnings prospects and an improved capital return profile.
Jet2 trades at about 9.5 times estimated earnings for fiscal 2026 and 8.3 times for fiscal 2027, below its long-term median of 10.4 times, according to RBC.
When measured on an EV/EBIT basis, the company is valued at less than 6 times fiscal 2026 estimates, in contrast to the 10 times multiple seen for European low-cost airline peers.
RBC said Jet2’s valuation gap is notable given its financial and operational performance. The company is forecast to deliver a return on capital employed of about 16.5% in fiscal 2026, well ahead of the roughly 10% median for European low-cost carriers.
Jet2 also maintains a strong balance sheet and net cash position, which RBC views as a key support for future growth and shareholder returns.
The valuation update came as RBC factored in Jet2’s ongoing £250 million share buyback program, including a convertible buyback in March that reduced the company’s diluted share count.
Although EBIT forecasts were only modestly adjusted, RBC noted that stronger earnings per share are now expected due to the repurchase activity.
In terms of broader operating trends, Jet2 has seen positive signals in U.K. travel demand. Website traffic rose 11% in March and April, and Barclaycard data showed a 6% rise in travel spending in April.
Meanwhile, in-flight retail spending per passenger has grown since the company launched a dedicated retail operations center in late 2023.
Fuel costs, which are down more than 20% year-over-year in the current quarter, are also providing tailwinds. Jet2 was 80% hedged for fuel and foreign exchange in fiscal 2026 as of its most recent trading update.
The airline’s ongoing fleet transition to larger, more fuel-efficient A321neo aircraft is expected to help mitigate broader industry cost pressures.
Jet2’s stock closed at £19.06 on June 6, with RBC’s updated price target implying around 17% upside. The bank’s upside scenario sees the shares rising to £29, while its downside case implies a fall to £12.
Jet2 remains the U.K.’s largest tour operator and one of the top four airlines by volume.
More than 80% of its revenue comes from package holidays, and the company operates flights from 11 U.K. airports to over 65 destinations.
RBC continues to cite the company’s integrated business model and customer satisfaction metrics as fundamental advantages.