At CL$14.77, Is LATAM Airlines Group S.A. (SNSE:LTM) Worth Looking At Closely?

LATAM Airlines Group S.A. (SNSE:LTM), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the SNSE. The recent share price gains has brought the company back closer to its yearly peak. 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. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on LATAM Airlines Group’s outlook and valuation to see if the opportunity still exists.

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What Is LATAM Airlines Group Worth?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 9.93x is trading slightly above its industry peers’ ratio of 9.87x, which means if you buy LATAM Airlines Group today, you’d be paying a relatively reasonable price for it. And if you believe that LATAM Airlines Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance 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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

See our latest analysis for LATAM Airlines Group

What kind of growth will LATAM Airlines Group 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. With profit expected to grow by 37% 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? LTM’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at LTM? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on LTM, 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 LTM, which means it’s worth further examining other factors such as the strength of its balance sheet, 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. Every company has risks, and we've spotted 2 warning signs for LATAM Airlines Group (of which 1 is a bit concerning!) you should know about.

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.