This small-cap has already turned £1,000 into £81,000. Time to buy?

When I first bought shares in low-cost travel provider Dart Group(LSE: DGT) in 2012, I thought the business was undervalued because the market didn't understand what management was doing with the enterprise.

The market seemed to be concentrating on the group's struggling distribution business and believed that management's expansion drive of Jet2holidays, as well as Jet2.com's flying programme, was ill-advised.

As a result, at the time, investors were only willing to award the shares a mid-single-digit earnings multiple.

Unfortunately, after doubling my money, I sold out of the stock in 2013. As it turns out, this was just the start of Dart's story. The shares have returned 1,370% excluding dividends between the beginning of 2012 to the time of writing. Over the past decade, the stock has produced a total return for investors of 49.2% per annum, turning every £1,000 invested into £81,400.

Flying high

The driver of these returns has been Dart's holiday business, which has taken off over the past five years.

Group revenue has risen from £683m in 2012 to £1.7bn for 2017. And this morning, the company reported that for the fiscal year to 31 March, revenue was £2.4bn, in line with City forecasts. EPS smashed expectations, coming in at 74.6p for the financial period, compared to the City's target of 63p.

Today's numbers will not only have City analysts revising their figures for 2018 but for 2019 as well. Dart has announced that, due to strong demand for its package holiday offerings, group profit before tax for the financial year ending 31 March 2019, will "substantially exceed current market expectations." Analysts had previously been expecting a small decline in EPS for 2019 to 61p.

However, despite this growth, (and even after the 34% jump in the share price today) shares in Dart still trade at what I believe is an undemanding P/E ratio.

Based on numbers for fiscal 2018 (as we're still waiting for the City to revise the figures for 2019) the stock is trading at a P/E of 13.2. For a business that has been able to grow net profit at a compound annual rate of 27% over the past six years, this multiple seems to undervalue the company.

Further growth on the cards?

The big question is, whether or not the company can continue to grow like a weed?

Selling holidays is a notoriously volatile and challenging business, Thomas Cook, for example, has spent the last few years in intensive care after coming close to bankruptcy in 2012/13.

In my view, Dart is unlikely to come to the same fate. Unlike Thomas Cook, the company has a strong balance sheet. Debt is entirely offset by cash, and the business is throwing off a tremendous amount of operating cash flow.

Dart's advantage is its low-cost offering. The firm has cracked the code of offering inexpensive, high-quality package holidays. And people are lining up to use its services. For 2018, the number of passengers flown by Jet2.com increased 46% to 10.4m. The number of package holiday customers booked jumped by a similar amount to 2.5m. All in all, several million more people used the company's services than the year before.

These numbers lead me to conclude that Dart's growth isn't going to come to a halt any time soon. In fact, it looks as if the sky is the limit for this holiday company. There's still time to buy into Dart's growth story.

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Rupert Hargreaves owns no share 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.

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