Does the Recent CEO Transition Signal Opportunity in Qantas Shares for 2025?

If you’ve been mulling over whether to buy, sell, or simply sit tight with your Qantas Airways stock, you’re not alone. The market world has been buzzing about Australian airlines lately, and Qantas is right at the center of attention. It hasn’t all been smooth sailing in recent weeks. The share price has dipped 3.7% over the past seven days and is down 1.9% for the month. Still, zoom out and you’ll spot something eye-catching: a 69.5% gain over the past year, with a 194.7% return across five years. Clearly, there’s some serious long-term momentum here.

Investors have been recalibrating their risk appetite and taking renewed interest in travel-related stocks as international demand picks up. Recent industry chatter, especially about route expansions and evolving travel trends, has played a part in shaping sentiment, sometimes amplifying volatility for airlines like Qantas. But beyond the headlines and short-term shifts, the real question is how fairly Qantas is valued compared to its peers and its own future prospects.

On the surface, Qantas ticks 2 out of 6 key criteria for being undervalued, landing it a value score of 2. That is not the most undervalued name on the ASX board, but it isn’t overpriced either. With so many opinions swirling around the stock, it’s time to dig into the different valuation approaches analysts use. As you’ll see, there is an even smarter way to figure out what Qantas is really worth coming up later in the article.

Qantas Airways scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Qantas Airways Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's value by projecting its future free cash flows and then discounting those numbers back to today. This helps investors gauge what the business could really be worth based on expected performance, rather than just current market mood.

For Qantas Airways, the most recent reported Free Cash Flow stands at A$884 million. Analyst forecasts extend several years ahead; for example, by 2028, Free Cash Flow is expected to be A$793 million. For long-range projections out to 2035, Simply Wall St extrapolates key figures, with cash flows rising gradually but never topping the billion-dollar mark, and a few forecast dips along the way.

On paper, the DCF calculation gives Qantas Airways an intrinsic value of A$5.90 per share. Compared to where the stock trades today, this means Qantas is a striking 93.4% overvalued, suggesting the market price is far above what the underlying future cash streams might justify.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Qantas Airways.

Our Discounted Cash Flow (DCF) analysis suggests Qantas Airways may be overvalued by 93.4%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Qantas Airways Price vs Earnings

For companies like Qantas Airways that are consistently profitable, the Price-to-Earnings (PE) ratio remains a popular and practical measure of value. This metric lets investors gauge how much they are paying for every dollar of earnings Qantas brings in. It is especially relevant for mature businesses with stable profits.

What makes a “normal” or “fair” PE ratio? Growth expectations, industry risk, and company stability all factor in. Generally, a higher expected earnings growth or lower risk justifies a higher PE, while more uncertainty or slow growth brings it down. Right now, Qantas’s PE ratio sits at 10.5x, slightly above the airlines industry average of 10.0x, but less than half the average of its closest peers at 25.3x.

Instead of only comparing against the industry or peers, Simply Wall St’s proprietary Fair Ratio for Qantas is 20.7x. This benchmark is tailored by taking into account the company’s unique earnings growth outlook, profit margins, relative risk profile, market cap, and the specific landscape of the airline industry. The Fair Ratio aims to show what a reasonable PE should be for Qantas given its true prospects, making it a more reliable mark than broad averages.

When compared, Qantas’s 10.5x PE is well below its Fair Ratio of 20.7x. This suggests the market may be underestimating the company’s value, especially in light of its sustained growth and profitability.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Qantas Airways Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative connects the story you believe about Qantas Airways, such as its plans for fleet renewal and dual brand strategy, to your own financial forecasts for the company, and then links those views through to a fair value estimate. Instead of only relying on standard metrics, Narratives allow you to express why you think Qantas is headed in a certain direction by combining your outlook on revenue, margins, and earnings with your rationale behind those numbers.

Best of all, Narratives are easy to use on Simply Wall St’s platform, available to millions of investors within the Qantas Airways Community page. You can compare your fair value to the current share price, helping you decide when to buy or sell based on what you believe, not just market noise. As new information like news or earnings emerges, Narratives update automatically, making them a dynamic and interactive way to stay informed.

For example, on Qantas Airways today, the most optimistic Narrative values the stock at A$14.45 per share, while the least bullish sees fair value closer to A$9.50. This shows how individual perspectives shape different investment decisions, all powered by the same easy-to-use tool.

Do you think there's more to the story for Qantas Airways? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

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