Does the Recent Share Price Surge Change the Outlook for Virgin Australia Shares in 2025?

If you have been watching Virgin Australia Holdings lately, you are not alone. The stock seems to be on quite a few radars these days, and for good reason. With a 5.7% pop over the last week and a 9.0% rise across both the past month and year to date, there is definitely momentum building. Investors are paying renewed attention, especially as the company benefits from broader industry optimism and changing risk perceptions in the airline sector. Even so, there is a real question on the table: is Virgin Australia Holdings still undervalued, or are investors already factoring in all the good news?

To help answer that, I have pulled the latest value score for Virgin Australia Holdings. Out of six fundamental checks typically used to screen for undervalued stocks, Virgin passes two. That gives it a value score of 2, suggesting some pockets of undervaluation, though not across the board. If you are looking for that perfect value play, the score is a good starting point, but it does not tell the full story on its own.

In the next section, I will break down exactly which valuation approaches were used and where Virgin Australia Holdings stands on each method. And stick around, because I will also reveal a smarter way crowds are using to judge stock value today, one that goes beyond the classic number crunching.

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

Approach 1: Virgin Australia Holdings Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a popular way to estimate the intrinsic value of a company by projecting its future cash flows and then discounting those projections back to the present using a required rate of return. This approach essentially asks: how much are all future cash flows worth in today's dollars?

For Virgin Australia Holdings, the latest reported Free Cash Flow stands at A$800.5 million. Over the next decade, analysts expect cash flow to fluctuate, with A$60.5 million projected in 2026 and as much as A$162.5 million in 2028. While analysts only forecast up to five years ahead, Simply Wall St extrapolates these projections out to 2035, offering a longer-term perspective on potential performance. All values are reflected in Australian dollars (A$).

Applying the 2 Stage Free Cash Flow to Equity model, the resulting estimated intrinsic value is A$0.71 per share. However, given the company's current trading price, this implies the stock is trading at a 394.9% premium to its calculated fair value according to the DCF. In short, the current market price already factors in optimistic cash flow growth, or more.

Result: OVERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Virgin Australia Holdings may be overvalued by 394.9%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Virgin Australia Holdings Price vs Earnings (P/E)

The Price-to-Earnings (P/E) ratio is a widely accepted tool for valuing profitable companies like Virgin Australia Holdings. It tells investors how much they are paying for each dollar of company earnings, making it a practical measure of perceived value and future growth opportunities within the business.

In theory, a higher P/E can signal the market expects significant future earnings growth or sees the company as a safer bet, justifying a premium. Conversely, a lower P/E might reflect lower expected growth, higher perceived risk, or the possibility of undervaluation if the market is too pessimistic. What counts as a “normal” or “fair” P/E will depend on the company’s growth prospects, profitability, and industry position.

Currently, Virgin Australia Holdings trades at a P/E of 5.5x. This is notably lower than both the airline industry average of 9.7x and the average for its closest peers at 16.3x. While a simple comparison to these numbers might suggest undervaluation, there is a deeper layer to consider.

This is where the “Fair Ratio” from Simply Wall St comes in. Instead of just benchmarking against industry or peers, the Fair Ratio blends together important factors such as the company’s long-term earnings growth, profit margins, risk profile, industry differences and even market cap. This comprehensive view accounts for why some stocks deserve to trade at a premium while others do not.

For Virgin Australia Holdings, the actual P/E is considerably below what would be suggested if it had stronger growth or a different risk outlook. With the Fair Ratio unavailable, investors must rely on the context provided by its low P/E compared to benchmarks. Right now, the numbers indicate the stock appears undervalued on a simple P/E basis, but this does not consider all the nuances that could move the stock closer to fair value if accounted for in a Fair Ratio calculation.

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 Virgin Australia Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your own story about a company. It is where you connect your assumptions around future growth, earnings, and profit margins with your view of what the stock is really worth. Narratives make it simple: they link the numbers you believe in to a fair value, helping you visualize if a stock is overpriced or a bargain based on your personal outlook.

On Simply Wall St's platform, Narratives are easy to create and accessible on the Community page, trusted by millions of investors. They help you decide when to buy or sell by comparing your calculated Fair Value to the current market Price, all in context with your assumptions. Narratives also update automatically whenever fresh news or earnings come in, ensuring your viewpoint always reflects the latest information.

For Virgin Australia Holdings, some investors’ Narratives forecast robust future profits and see strong upside with a high fair value, while others predict more modest growth and a much lower fair value. Narratives empower you to invest with confidence because it is your story, backed by your numbers, and updated in real time.

Do you think there's more to the story for Virgin Australia Holdings? 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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