When Should You Buy Korean Air Lines Co., Ltd. (KRX:003490)?

Korean Air Lines Co., Ltd. (KRX:003490), 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 KOSE. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Korean Air Lines’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Korean Air Lines

Is Korean Air Lines still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 19% below my intrinsic value, which means if you buy Korean Air Lines today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth ₩35885.46, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Korean Air Lines’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Korean Air Lines generate?

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 97% over the next couple of years, the future seems bright for Korean Air Lines. 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 already priced in A003490’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on A003490, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 2 warning signs with Korean Air Lines, and understanding them should be part of your investment process.

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This article by Simply Wall St is general in nature. 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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