Should You Reconsider Air China After Shares Jump 73% Amid Travel Boom in 2025?

Wondering what to do about Air China stock? If you are weighing your next investment move, you are not alone. Air China has been quietly drawing more attention, and for good reason. Over the last year, its share price has soared by 73.3%, which is a massive return compared to many peers. Even so, the ride has not exactly been smooth. The stock is up 4.4% in just the past week, possibly reflecting renewed enthusiasm after recent market developments in the aviation sector. At the same time, the last month saw a dip of 3.7%, reminding us how quickly risk perceptions can shift.

Looking further back, you will notice Air China’s returns over the past three and five years remain negative, underscoring just how much has changed recently. Investors are clearly reacting not just to short-term sentiment, but also to broader optimism for air travel demand and China’s reopening momentum. Right now, Air China trades at 5.2 yuan per share and has received a value score of 2, meaning it looks undervalued on 2 out of 6 major valuation checks. That is a mixed score, but it definitely suggests room for a deeper look.

If you want a clearer sense of where Air China stands from a valuation standpoint, keep reading. We are about to break down those valuation approaches one by one. Stay tuned for the end, when I will reveal a perspective that goes beyond numbers alone.

Air China scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Air China Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a widely used method for valuing companies by forecasting future free cash flows and then discounting them back to today’s value. In essence, it estimates what the business is worth based on the cash it is expected to generate in the future.

For Air China, the most recent data shows a trailing twelve months free cash flow of around CN¥11.58 Billion. Analysts expect this to grow steadily, with forecasts reaching CN¥21.33 Billion by 2027. Beyond the analyst window, further projections are extrapolated, suggesting the company’s free cash flow could rise to nearly CN¥36.99 Billion by 2035, based on reasonable growth rates.

• The current free cash flow: CN¥11.58 Billion
• Projected free cash flow in five years: CN¥21.33 Billion (2027 estimate)
• Projected free cash flow in ten years: CN¥36.99 Billion (2035 extrapolation)

Using these projections, the DCF valuation estimates Air China’s intrinsic value at CN¥15.61 per share. With the current trading price at CN¥5.20 per share, the DCF model indicates the stock is about 66.7% undervalued. This points to significant potential based on future cash flow expectations.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Air China.

Our Discounted Cash Flow (DCF) analysis suggests Air China is undervalued by 66.7%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Air China Price vs Earnings (PE Ratio)

The Price-to-Earnings (PE) ratio is a go-to metric for evaluating profitable companies like Air China, as it directly relates a company’s market value to its earnings. The PE ratio reflects how much investors are willing to pay for each dollar of net profit, making it especially relevant for established firms reporting positive earnings. However, what counts as a "normal" or "fair" PE ratio often depends on expectations around future growth, risk, and industry dynamics. Companies with rapid growth and strong competitive positions typically deserve higher PE ratios, while those facing uncertainty or slower growth usually trade at a lower multiple.

Currently, Air China trades at a steep PE ratio of 112.3x. This stands in stark contrast to the average for the airlines industry at 10.0x, and its peers, which average 9.4x. Such a high PE ratio generally suggests the market is pricing in very high expectations for earnings growth, or that current profits are unusually low compared to long-term potential.

Simply Wall St provides a proprietary Fair PE Ratio for Air China of 49.2x. Unlike basic industry or peer comparisons, the Fair Ratio is tailored to capture a company’s unique situation. It factors in its growth outlook, profit margins, market cap, and the specific risks it faces. This makes it a more comprehensive benchmark when judging whether a stock’s valuation is justified.

Comparing Air China’s current PE ratio of 112.3x to its Fair Ratio of 49.2x reveals that the stock is trading well above what its fundamentals warrant. This suggests that, by this method, Air China appears overvalued at today’s price.

Result: OVERVALUED

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 Air China Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let’s introduce you to Narratives. A Narrative is more than just crunching numbers; it is your story behind a company’s future, combining your assumptions for fair value with your perspective on future revenue, earnings, and margins. Narratives link Air China’s business story to real financial forecasts, turning numbers into meaningful investment convictions.

This approach is easy and accessible, and it is available to millions of investors on Simply Wall St’s Community page. With Narratives, you can compare your fair value to Air China’s actual share price, so you know when the gap is attractive and when it is not. These Narratives update automatically as news or earnings reports are released, making sure your outlook always reflects the latest events.

For example, in the Air China Community, one investor’s optimistic Narrative could value the stock at a high, while another might see more risks ahead and estimate a much lower fair value. By making these perspectives visible and dynamic, Narratives help you upgrade your decision-making and invest with greater confidence.

Do you think there's more to the story for Air China? 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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