When Should You Buy LATAM Airlines Group S.A. (SNSE:LTM)?

Let's talk about the popular LATAM Airlines Group S.A. (SNSE:LTM). The company's shares saw a significant share price rise of 49% in the past couple of months on the SNSE. The company is now trading at yearly-high levels following the recent surge in its share price. With many analysts covering the large-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? Today we will analyse the most recent data on LATAM Airlines Group’s outlook and valuation to see if the opportunity still exists.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

What Is LATAM Airlines Group Worth?

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. 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 11.92x is currently well-above the industry average of 9.84x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline 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.

View our latest analysis for LATAM Airlines Group

Can we expect growth from LATAM Airlines Group?

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 36% 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 optimistic prospect is encouraging for LTM, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 1 warning sign with LATAM Airlines Group, and understanding this should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.