At CL$12.40, Is It Time To Put LATAM Airlines Group S.A. (SNSE:LTM) On Your Watch List?

While LATAM Airlines Group S.A. (SNSE:LTM) might not have the largest market cap around , it saw a significant share price rise of 28% in the past couple of months on the SNSE. The company is inching closer to its yearly highs following the recent share price climb. 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. But what if there is still an opportunity to buy? Let’s examine LATAM Airlines Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for LATAM Airlines Group

Is LATAM Airlines Group Still Cheap?

LATAM Airlines Group is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that LATAM Airlines Group’s ratio of 13.51x is above its peer average of 8.76x, which suggests the stock is trading at a higher price compared to the Airlines industry. But, is there another opportunity to buy low in the future? Given that LATAM Airlines Group’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of LATAM Airlines Group look like?

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. With profit expected to grow by 92% over the next couple of years, the future seems bright for LATAM 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? It seems like the market has well and truly priced in LTM’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe LTM should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on LTM for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for LTM, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into LATAM Airlines Group, you'd also look into what risks it is currently facing. When we did our research, we found 3 warning signs for LATAM Airlines Group (1 is a bit concerning!) that we believe deserve your full attention.

If you are no longer interested in LATAM Airlines Group, you can use our free platform to see our 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. 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.