Is Now the Time to Buy TUI Travel?

LONDON -- I'm always searching for shares that can help ordinary investors like you make money from the stock market.

So, right now, I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I'm hoping to pinpoint the very best buying opportunities in today's uncertain market.

Today, I am looking at TUI Travel (LSE: TT) (NASDAQOTH: TTVLF) to determine whether you should consider buying the shares at 316 pence.

I am assessing each company on several ratios:

• Price/Earnings (P/E): Does the share look good value when compared against its competitors?
• Price Earnings Growth (PEG): Does the share look good value factoring in predicted growth?
• Yield: Does the share provide a solid income for investors?
• Dividend Cover: Is the dividend sustainable?

So let's look at the numbers:

The consensus analyst estimate for this year's earnings per share is 27.6 pence (7% growth) and dividend per share is 12.6 pence (8% growth).

Trading on a projected P/E of 11.4, TUI appears cheaper than its peers in the travel and leisure sector, which are currently trading on an average P/E of around 20.

TUI's P/E and high single-digit growth rate give a PEG ratio of around 1.6, which implies the share price is slightly expensive for the near-term earnings growth that the firm is expected to produce.

Offering a 3.7% yield, TUI's dividend yield is above the sector average of 2.4%. In addition, TUI has a three-year compounded dividend growth rate of 6%, implying the yield will continue to rise above that of its peers -- albeit slowly.

Indeed, the dividend is more than two times covered by earnings, giving TUI plenty room for further payout growth.

So, is now the time to buy TUI Travel?
TUI Travel is one of the world's leading leisure and travel companies, with more than 240 brands covering 180 countries. Indeed, it is this market-leading position and geographical diversification that leads me to believe that TUI is currently undervalued.

You see, while TUI's main peer, Thomas Cook, struggles with falling sales due to the economic environment, TUI's geographical diversification has allowed the company to continue growing, despite falling sales in some of its key markets.

In particular, within the company's most recent trading update, TUI announced that, while its sales of winter holidays to French customers had fallen 25%, sales of holidays to customers in the U.K. and Nordic regions had offset the entire decline and, overall, sales grew by 2%.

Furthermore, TUI reported within the same statement that group sales of summer holidays for 2013 had expanded 7%, with growth underpinned once again by double-digit sales growth to customers in the U.K. and Nordic regions.

So, overall, based on TUI's low relative valuation, continuing growth and solid dividend yield, I believe now looks to be a good time to buy the shares at 316 pence.

More FTSE opportunities
As well as TUI Travel, I am also positive on the five FTSE shares highlighted within this exclusive wealth report.

Indeed, all five opportunities offer a mix of robust prospects, illustrious histories, and dependable dividends, and have just been declared by the Fool as "5 Shares You Can Retire On!"

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In the meantime, please stay tuned for my next verdict on a FTSE 100 share.

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