Investor/an investor's guide to the market:Despite the headwind of rising bond yields, global equity markets maintained their bull run in January - reflected in the 1.6 per cent rise in the MSCI World index. Ireland under-performed during the month with a decline of 2.2 per cent compared with the 2.1 per cent rise in the FTSE E300.

This under-performance in January was not surprising given the very large rise in the Irish index in the latter part of 2006. However, February has got off to a bright start and already the Irish market has made up most of the lost ground.

Investor expects this bullish tone to continue at least for the remainder of the first quarter. In the US, economists have edged up their growth forecasts for 2007 on the back of stronger-than-expected data for the fourth quarter. The first estimate for fourth-quarter US GDP was an annualised 3.5 per cent, compared to 2 per cent in the third quarter.

In Europe, forward momentum is sufficiently strong in the main economies to ensure another year of good growth in 2007. Recently released data for the purchasing managers' index for conditions in euro-zone services industries in January was stronger than expected. This and other data suggest that the continent's biggest economy, Germany, is taking a recent three percentage point hike in VAT rates in its stride.

Better economic performance in the fourth quarter has fed through to a healthy earnings reporting season in the US. However, forward indicators from corporations point to a much slower pace of profit growth in 2007.

One of the key planks that supported the outperformance of the Irish market in 2006 was exceptionally strong growth in corporate earnings, which are estimated to have grown by 22 per cent. With the Irish reporting season about to get into full swing, the likelihood is that the eventual outcome for 2006 will be even higher than the current estimate.

More importantly, however, is that this positive momentum should carry forward into 2007. With the Irish economy continuing to boom, buoyant corporate profit growth in 2007 could well serve to support another year of outperformance by the Irish market.

This will certainly be the case if the remarkable third quarter Ryanair results - covering the period from October to December - are a harbinger of the upcoming reporting season. Adjusted earnings per share (EPS) rose by 29 per cent to 6.2 cent, easily surpassing analysts' forecasts of about 0.6 cent.

This means that for the nine months to end-December 2006, the company generated EPS of 48.8 cent, which is 37 per cent up on 2005. The results reflected strong traffic growth of 19 per cent and ongoing buoyant growth in ancillary revenues. Average fares rose by 7.1 per cent, which was much better than analysts' expectations of an improvement of approximately 4 per cent.

This improvement in yield is in part due to the imposition of baggage charges. Anyone booking flights on Ryanair now finds that the total charge to their credit card is often a multiple of the advertised low fare. Government taxes account for a significant part of the cost, but the rest is made up of Ryanair charges.

Ryanair's fares are still generally very good value, but the additional charges have proved to be extremely effective at increasing revenue per passenger.

Unit costs grew by 13.7 per cent in the quarter but, when fuel is excluded, the increase was only 5.9 per cent. The decline in the oil price over the latter part of 2006 will be a major bonus for Ryanair in 2007 and 2008. Ryanair now has substantial hedges in place up to March 2008 at fuel prices below those incurred in 2006. With the oil price staying well below the peak of last summer, further opportunities to lock into lower oil prices for all of the airlines requirements should arise.

Strong revenue growth combined with Ryanair's legendary cost control and the benign oil price environment point to very strong profit growth over the next 12-18 months. Not surprisingly the share price reacted very favourably to these results and has now risen by approximately 60 per cent over the past year. However, airline stocks in general have had a very good 12 months and, up to recently, Ryanair had under-performed the sector.

Therefore, despite this recent strong run, Investor believes that current favourable industry conditions and Ryanair's dominant market position provide scope for further substantial upside potential in the share price.