Why I'd buy growth stock Ryanair Holdings plc and hold it for 10 years

Ryanair airplane
Ryanair airplane

Like Aldi and Lidl have done in the grocery space, Ryanair(LSE: RYA) and its fellow cut-price flyers have changed the aviation industry forever.

Travellers no longer expect to have to shell out a small fortune to move across the skies, whether for a quick hop to the continent or a long-haul break to the US. And Ryanair's splendid latest trading numbers illustrate that its allure with holidaymakers and businesspeople alike is still going from strength to strength.

Today the Dublin flyer declared that sales boomed 7% during the six months to September, to EUR4.43bn, a result that pushed post-tax profit 11% higher to EUR1.29bn.

The airline shifted 72.1m passengers during the first half, it advised, up 11% year-on-year, and the cheery numbers led colourful chief executive Michael O'Leary to proclaim: "These strong... results reinforce the robust nature of Ryanair's low fare, pan-European growth model even during a period which suffered a material failure in our pilot rostering function in early September."

The company was the subject of nightmarish headlines last month after it cancelled and delayed flights due to pilot rostering problems. And Ryanair warned today that, in a bid to keep its pilots from defecting to its rivals, its crew costs would increase by EUR45m for the current year and by EUR100m per year after that.

On cloud nine

Still, today's update has underlined the terrific earnings potential of Ryanair's model, and as a consequence its share price has broken out of its recent downtrend and was last trading 6% higher on Tuesday.

The company saw traffic rise 11% in the first half, and even though fares fell 5%, this could not stop total revenues spiralling higher. Indeed, Ryanair also saw customer spend edge 2% higher as travellers took out optional services like reserved seats and priority boarding.

The airline opened three new bases and launched 80 new routes during the first six fiscal months, and further expansion is on the cards to keep sales on an upward tilt.

City brokers are expecting earnings to soar 15% in the full year to March 2018 and, with revenues expected to keep rising and costs remain under control (these fell 5% in the first half, Ryanair said today), a further 10% bottom-line rise is forecast for fiscal 2019.

As a result, the flying ace changes hands on a forward P/E ratio of 15.8 times. I consider this to be far too cheap when you consider Ryanair's exceptional long-term earnings possibilities.

Another great growth pick

Robert Walters(LSE: RWA) is another company which, like Ryanair, can look forward to titanic profits growth as it expands across foreign territories.

The recruitment giant's share price continues to rise to record peak after record peak, and latest trading numbers this month gave it a further hefty dose of jet fuel. Group revenues exploded 22% during July-September, to £90.7m, with sales in Europe and Asia Pacific rising 39% and 15% respectively, and 75% in its other overseas regions. In the UK revenues rose 15%.

So it should not surprise that City analysts are expecting earnings to rattle 22% and 13% higher in 2017 and 2018 respectively. While a prospective P/E rating of 18.3 times may look a bit toppy on paper, a corresponding PEG reading of 0.8 suggests Robert Walters remains brilliantly priced relative to its growth potential.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.