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Finding the best shares to buy is a challenging task. But for anyone who spotted Saga (LSE:SAGA) shares at the start of this year is understandably laughing right now. While the FTSE 100 has already climbed by almost 5%, the shares of this over-50s lifestyle and travel group have delivered almost 10 times this amount!
What’s behind the sudden surge? And is it too late for investors to hop aboard the gravy train?
What’s going on with Saga?
For most of January, Saga shares were pretty much flat. It wasn’t until the end of the month that the stock started taking off, triggered by a significantly better-than-expected trading update.
The group smashed past analyst expectations, with pre-tax profits now on track to surpass previous expectations. At the same time, the subsequently boost to cash flow means that Saga’s long-time troubling debt is also falling faster than anticipated.
Digging deeper, a big driver of this surprise growth appears to stem from its Ocean Cruise business. Passenger load factor continues to climb, reaching 93% versus 91% a year ago. But more crucially, the average amount of money generated per passenger per day has also jumped 10% to £394, enabling the group’s expansion of profit margins.
Even River Cruises seems to be delivering impressive results. While the load factor remained stable at 89%, the average daily passenger revenue increased by 7% to £349. And a quick glance at Saga’s packaged holidays segment, passenger volumes and spending were also up by double digits.
What’s more, looking ahead to early bookings for 2027, the current upward trend seems to be continuing. And with revenues, cash flows, and profits all marching higher, management has declared that Saga has officially “passed its peak leverage point”.
In other words, the business appears to be in full recovery mode. And with the FTSE stock still trading at a modest valuation, there could still be ample room for investors to profit.
What to watch
There’s no denying that the momentum behind Saga shares is impressive. And since we’re still in the early days of what could be a multi-year recovery, it’s easy to see why more investors are seeing Saga shares as some of the best to buy today.
However, while the growth prospects are undoubtedly exciting, it’s important to recognise that there remains considerable execution risk.
Even with the group moving past ‘peak leverage’, the firm’s outstanding debt pile nonetheless remains pretty substantial. In fact, as of July 2025, the net debt position stood at £515.1m, placing the group’s leverage ratio at a concerning 4.3. For reference, anything above two is typically viewed as troublesome.
Paying down its debts will be a top priority. But if older consumers start cutting back on discretionary travel spending, Saga’s current bookings momentum could slow. In this scenario, cash flows could slump, drastically slowing the firm’s deleveraging efforts.
Nevertheless, for investors with a higher risk tolerance, Saga shares could still be worth a closer look. And it’s not the only turnaround opportunity I’ve got on my radar right now.
