What Does Norwegian Air Shuttle ASA's (OB:NAS) Share Price Indicate?
Norwegian Air Shuttle ASA (OB:NAS), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the OB. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Norwegian Air Shuttle’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for Norwegian Air Shuttle
What Is Norwegian Air Shuttle Worth?
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 16.99x is trading slightly above its industry peers’ ratio of 12.23x, which means if you buy Norwegian Air Shuttle today, you’d be paying a relatively reasonable price for it. And if you believe that Norwegian Air Shuttle should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Is there another opportunity to buy low in the future? Since Norwegian Air Shuttle’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Norwegian Air Shuttle look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Norwegian Air Shuttle's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in NAS’s positive outlook, with shares trading around industry price multiples. 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 NAS? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on NAS, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast 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.
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. While conducting our analysis, we found that Norwegian Air Shuttle has 1 warning sign and it would be unwise to ignore it.
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.
About OB:NAS
Norwegian Air Shuttle
Provides air travel services in Norway and internationally.
Excellent balance sheet with proven track record.