Is It Time To Consider Buying Norwegian Air Shuttle ASA (OB:NAS)?

Norwegian Air Shuttle ASA (OB:NAS), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the OB over the last few months, increasing to kr11.38 at one point, and dropping to the lows of kr7.55. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Norwegian Air Shuttle's current trading price of kr7.55 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Norwegian Air Shuttle’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Norwegian Air Shuttle

What's The Opportunity In Norwegian Air Shuttle?

According to my 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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Norwegian Air Shuttle’s ratio of 15.14x is trading slightly above its industry peers’ ratio of 12.62x, which means if you buy Norwegian Air Shuttle today, you’d be paying a relatively sensible price for it. And if you believe Norwegian Air Shuttle 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. Furthermore, Norwegian Air Shuttle’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will Norwegian Air Shuttle generate?

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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 72% over the next couple of years, the future seems bright for Norwegian Air Shuttle. 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? NAS’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 track record of its management team. Have these factors changed since the last time you looked at NAS? 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 an eye on NAS, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for NAS, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Norwegian Air Shuttle has 2 warning signs we think you should be aware of.

If you are no longer interested in Norwegian Air Shuttle, 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.