International Consolidated Airlines Group, S.A. (LON:IAG), which is in the airlines business, and is based in Spain, saw a double-digit share price rise of over 10% in the past couple of months on the LSE. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine International Consolidated Airlines Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for International Consolidated Airlines Group
What is International Consolidated Airlines Group worth?
The share price seems sensible at the moment according to my price multiple model, where I compare the company’s price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 2.66x is currently trading slightly below its industry peers’ ratio of 3.57x, which means if you buy International Consolidated Airlines Group today, you’d be paying a decent price for it. And if you believe that International Consolidated Airlines Group should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, International Consolidated Airlines Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
Can we expect growth from International Consolidated Airlines Group?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 45% over the next couple of years, the future seems bright for International Consolidated Airlines Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? IAG’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at IAG? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on IAG, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for IAG, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on International Consolidated Airlines Group. You can find everything you need to know about International Consolidated Airlines Group in the latest infographic research report. If you are no longer interested in International Consolidated Airlines Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.