Is IAG Still Attractive After Its 109% Surge and Strong 2024 Recovery Trends?

If you have ever wondered whether International Consolidated Airlines Group's stock has more runway ahead, you are not alone. With shares closing most recently at 3.942, investors are closely re-examining their next move: is it time to buy, hold, or even cash out? Confidence is in the air, and not just because planes are flying. Over the last twelve months, the stock has soared 109.2%, with momentum intensifying further; it is up 30.3% year-to-date and a remarkable 259.4% over the past three years. Even short-term numbers stand strong, with the price gaining 5.5% in the last month and just edging up 0.2% in the last week.

Some of this upward journey comes as airlines globally adapt to shifting travel demand and operational strategies. Investors seem to believe the worst might be behind, with renewed optimism for ongoing travel recovery and improved cost management. Yet, not every surge lasts, prompting the real question: is the price justified, or flying too high?

That is where valuation becomes crucial. By most measures, International Consolidated Airlines Group looks undervalued, scoring a 5 out of 6 on our most reliable valuation checks. In plain English, almost every indicator suggests the share price still does not reflect the company’s financial fundamentals. But how do these valuation models stack up, and can we find an even better way to assess what the stock is worth? Let’s break down the main approaches and look for the truly insightful angle at the end of the article.

International Consolidated Airlines Group delivered 109.2% returns over the last year. See how this stacks up to the rest of the Airlines industry.

Approach 1: International Consolidated Airlines Group Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates what a company is truly worth by projecting its future cash flows and then discounting those expected amounts back to today's value. In simple terms, it asks how much the business's future cash profits are worth if you had them now.

For International Consolidated Airlines Group, reported Free Cash Flow over the last twelve months was €2.09 Billion. Analysts have provided projections out to 2029, expecting Free Cash Flow to rise to €4.72 Billion. Beyond that point, Simply Wall St extrapolates further out and anticipates steady long-term growth over the coming decade. Notably, cash flow is forecasted to surpass €6.4 Billion by 2035.

Using a two-stage Free Cash Flow to Equity model, the result is an estimated intrinsic value of €11.66 per share. With the current share price at £3.94, the model suggests the stock is trading at a significant 66.2% discount to intrinsic value.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for International Consolidated Airlines Group.

Our Discounted Cash Flow (DCF) analysis suggests International Consolidated Airlines Group is undervalued by 66.2%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: International Consolidated Airlines Group Price vs Earnings

The Price-to-Earnings (PE) ratio is a popular valuation metric for profitable companies because it directly compares a company’s share price to its earnings. For companies like International Consolidated Airlines Group that are reporting solid profits, the PE ratio offers investors an easy way to gauge how the market values each pound of earnings.

What constitutes a “normal” or “fair” PE ratio often depends on factors such as growth expectations and perceived risk. Higher growth companies usually command higher PE ratios, while greater risks or volatility lead to lower ones. It’s important to recognize these influences before judging whether a stock is expensive or cheap.

Currently, International Consolidated Airlines Group trades at a PE ratio of 6.7x. This is lower than the Airlines industry average of 9.9x and below the average PE of its direct peers at 13.6x. Simply Wall St’s proprietary “Fair Ratio,” a valuation multiple tailored for the company based on earnings growth, industry, profit margin, market cap, and unique risks, comes out at 13.8x.

This “Fair Ratio” goes beyond a simple comparison with peers or industry averages because it incorporates important factors specific to International Consolidated Airlines Group. By evaluating growth potential, risk, margins, and size, it provides a more reliable benchmark for fair value than raw averages alone.

Comparing the Fair Ratio (13.8x) to the company’s actual PE (6.7x) indicates the stock is still trading well below what would be reasonable given its outlook and profitability.

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 International Consolidated Airlines Group Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is a simple, story-driven framework where you create and follow your own investment perspective by combining your view of a company's future (revenue, earnings, and margins) with the numbers to reach your version of fair value.

Narratives link the company's story, such as big strategic moves, market shifts, or operational changes, directly to a financial forecast and then to what you believe is a reasonable price for the shares. They work as an easy and accessible tool available on the Simply Wall St Community page, already used by millions of investors worldwide.

As new information becomes available (for example, major news or fresh earnings reports), Narratives update dynamically to reflect those changes. This helps investors keep their fair value up to date and react faster. By comparing your Narrative’s Fair Value to the current Price, you can clearly see if it might be a good time to buy or sell, rather than relying solely on raw data or static ratios.

For International Consolidated Airlines Group, one Narrative might focus on fleet modernization, digital upgrades, and premium leisure demand to forecast a fair value as high as £5.83. Another could highlight cost pressures and subdued demand, leading to a fair value closer to £3.45.

Do you think there's more to the story for International Consolidated Airlines Group? 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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