Public Joint Stock Company Aeroflot – Russian Airlines (MCX:AFLT), which is in the airlines business, and is based in Russia, saw a significant share price rise of over 20% in the past couple of months on the MISX. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Aeroflot – Russian Airlines’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Aeroflot – Russian Airlines
What’s the opportunity in Aeroflot – Russian Airlines?
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 12.17x is currently trading slightly above its industry peers’ ratio of 8.49x, which means if you buy Aeroflot – Russian Airlines today, you’d be paying a relatively sensible price for it. And if you believe Aeroflot – Russian Airlines should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Aeroflot – Russian Airlines’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Aeroflot – Russian Airlines generate?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Aeroflot – Russian Airlines’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in AFLT’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at AFLT? 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 an eye on AFLT, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for AFLT, which means it’s worth diving deeper into 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 Aeroflot – Russian Airlines. You can find everything you need to know about Aeroflot – Russian Airlines in the latest infographic research report. If you are no longer interested in Aeroflot – Russian Airlines, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.