Recruitment consultantRobert Walters(LSE: RWA) and budget airlineRyanair(LSE: RYA) are both rising today, after the two companies issued upbeat trading updates.
Indeed, at time of writing Robert Walters has jumped 11% after the company raised its full-year outlook for the third time this year. Additionally, Ryanairs shares have gained 8.6% at time of writing after the companyraised its 2014 passenger and profit guidance for a third time in three months.
Profiting from economic growth
Recruiter, Robert Walters has been able to benefit from the global economic recovery as the demand for skilled professionals increases. The company has hiked its full-year outlook three times this year so far, as a strong performance across all of its regions has helped to drive growth.
Management now expects full-year profit to be materially ahead of market expectations. City analysts were expecting a pre-tax profit of 13.8m for this year, or earnings per share of 11.6p. However, now the company expects to outperform, analysts will have to tear up their estimates and start again.
That being said, even though todays news from Robert Walters is exciting for the company and its shareholders, the groups shares look expensive at present levels. For example, the company currently trades at a forward P/E of 23.5, which is justifiable based on the fact that earnings per share are expected to expand more than 40% this year.
Still, it should be noted that Robert Walters business is highly cyclical, therefore the good times are unlikely to last for ever. With this being the case, a high valuation of more than 20 times forward earnings seems questionable.
Discount boost
Meanwhile, Ryanair has alsoupgraded its full-year profit goal for the third time this year. Management now believe that pre-tax profit for the 12 months to March 31 will be in the range of 810m to 830m, compared with 760m predicted just four weeks ago.
Management believes that aslowdown in the European economy could push people in its direction. Whats more, Ryanair has profited from its decision to appeal to business customers. Year-on-year Ryanairs traffic gained 22% withload factors rising 7% to 88%. Seat capacity was up 13% for the month from a year earlier.
However, it seems as if investors are willing to pay a premium for this growth. Ryanair is currently trading at a forward P/E of 15.9, which could be too expensive for some investors. The companys earnings per share are expected to expand 48% this year. So for growth investors Ryanair could be worth a second look. Earnings per share growth of 13% is expected next year.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
