Should You Think About Buying LATAM Airlines Group S.A. (SNSE:LTM) Now?

LATAM Airlines Group S.A. (SNSE:LTM), is not the largest company out there, 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? Let’s take a look at LATAM Airlines Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for LATAM Airlines Group

What's The Opportunity In LATAM Airlines Group?

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. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 10.98x is currently trading slightly above its industry peers’ ratio of 9.55x, which means if you buy LATAM Airlines Group today, you’d be paying a relatively reasonable price for it. And if you believe LATAM Airlines Group should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. 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.

Can we expect growth from LATAM Airlines Group?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 76% 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 confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on LTM, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for LTM, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 3 warning signs for LATAM Airlines Group (1 makes us a bit uncomfortable!) 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.