Fundamental Analysis of Equities - Valuation of EasyJet with Investment Recommendation

This thesis aims to evaluate the intrinsic value of EasyJet's shares through a comprehensive analysis. EasyJet is a prominent player in the European low-cost airline market, known for offering competitive fares while optimizing operational efficiency. However, the aviation sector faces increasing environmental challenges, with significant pressure to reduce carbon emissions and adopt sustainable practices. This study begins with a strategic analysis of EasyJet, highlighting its strengths, weaknesses, opportunities, and threats. Special attention is given to environmental risks and opportunities, evaluating EasyJet's initiatives to reduce its carbon footprint. The financial analysis of EasyJet includes a detailed assessment of the company's financial health. The study reveals that net profitability multiples, such as the P/E ratio, provide a more accurate reflection of EasyJet's market value compared to gross results metrics like revenue or gross profit. This is due to the inclusion of comprehensive costs, taxes, interest, and depreciation, offering a realistic and conservative view of the company's financial performance amidst market volatility and environmental pressures. The valuation using the Discounted Cash Flow (DCF) method considers three scenarios: pessimistic, realistic, and optimistic, with respective share valuations of £5.395, £10.767, and £12.522 based on environmental compliance. The recommendation to buy EasyJet shares is supported by the alignment of the net profitability multiples with the current market value and the significant growth potential highlighted in the realistic scenario. In conclusion, despite the inherent risks and substantial investments required for environmental compliance, the significant upside potential justifies a buy recommendation for EasyJet shares. The study provides clear and justified guidance for investors, considering current economic, industrial, and environmental perspectives.