Has the Qantas Share Price Run Too Far Ahead of Its Fundamentals in 2025?

Simply Wall St

Thinking about what to do with your Qantas Airways shares, or considering whether now is the right time to buy into Australia’s flagship airline? You’re definitely not alone. Qantas stock has been grabbing the attention of investors thanks to some wild swings and a rollercoaster of sentiment shifts. Just look at the numbers: over the past year, the stock has soared 63.4%, and if you stretch that out to five years, we’re talking about a staggering 164.8% gain. Even so, the journey has not been perfectly smooth. Over the last month, Qantas has lost 7.7% of its value, including a 1.2% drop this past week. Yet, with a year-to-date increase of nearly 20%, there is no denying the market is seeing something more than just turbulence in Qantas’ flight path.

Many investors are weighing up whether this recent volatility signals a ripe buying opportunity or hints at fresh risks. While some of those gains have been driven by renewed optimism in travel demand and ongoing industry shifts, Qantas’ valuation story is where things really get interesting. By the numbers, the company scores a 2 out of 6 on our undervaluation checklist. That suggests Qantas only passes two of the six key tests for being undervalued. But are the standard valuation methods giving us the full picture?

In the next section, we will break down exactly how Qantas fares on different valuation approaches, and stick around as we also explore an even sharper way to get to the heart of what this airline is really worth.

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) approach estimates the value of a company by projecting its future free cash flows and discounting them back to today's value. This model aims to answer what the business is truly worth, based on its ability to generate cash in the future rather than market sentiment or short-term results.

For Qantas Airways, the most recent Free Cash Flow (FCF) stands at A$884 million. Analysts provide detailed projections over the next five years, with forecasts further extrapolated to a decade out by Simply Wall St. For example, free cash flow is expected to reach A$793 million in 2028. Looking even further, estimated FCFs for 2029 and 2030 are A$712.2 million and A$668 million, respectively, showing fluctuations rather than consistent growth.

After crunching the numbers using a two-stage Free Cash Flow to Equity model, the intrinsic value calculated for Qantas shares comes in at A$5.74. Compared to current trading levels, this suggests the stock is around 89.5% overvalued based on future cash flow potential. This represents a significant premium to the fundamental value.

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.

QAN Discounted Cash Flow as at Oct 2025

Our Discounted Cash Flow (DCF) analysis suggests Qantas Airways may be overvalued by 89.5%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Qantas Airways Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation tool, especially suited to established, profitable companies like Qantas Airways. This multiple shows how much investors are willing to pay for each dollar of earnings, making it a practical shorthand for market confidence in future profit growth.

What counts as a “fair” PE depends on factors such as anticipated earnings growth and company risk. Higher growth prospects or lower risk can justify a higher PE, while slower growth or more risk usually means investors will pay less for each dollar of profit. For Qantas, the current PE sits at 10x. This is just slightly above the average for the airlines industry, which is 9.3x, but well below the peer average of 25.2x.

However, comparing only to industry or peer averages can overlook important differences in growth, profitability and company size. That is why Simply Wall St’s Fair Ratio takes a more tailored approach. It incorporates Qantas’ unique characteristics, including projected earnings growth, risk profile, profit margins, and market cap, to determine a PE that is specifically relevant for this company. For Qantas, the calculated Fair Ratio is 20.7x, more than double its current PE. This suggests that the stock may be trading at a significant discount relative to what would be considered justified based on its fundamentals.

Result: UNDERVALUED

ASX:QAN PE Ratio as at Oct 2025

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 there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your personalized story about Qantas, connecting your view of its future (like expected revenue, earnings, or profit margins) with a projected fair value, all based on what you believe will drive the company's results. Narratives let you tie together news, forecasts, and your assumptions, then see how your perspective compares to others in the market.

Available on Simply Wall St’s Community page, Narratives are a simple and dynamic tool used by millions of investors to clarify buying and selling decisions. They show you instantly whether Qantas is trading above or below the fair value you believe in. Plus, because Narratives update automatically as new information comes in, your view always stays relevant and in sync with the latest market changes.

For example, some investors believe Qantas is worth A$14.45, driven by optimism around its fleet renewal and loyalty strategy. Others see risks, from legislative costs to international competition, that put fair value as low as A$9.50. Narratives help you capture and refine your view, so you can invest confidently based on the story you think is most probable.

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

ASX:QAN Community Fair Values as at Oct 2025

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.

Valuation is complex, but we're here to simplify it.

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