Air New Zealand Limited (NZSE:AIR), is not the largest company out there, but it saw significant share price movement during recent months on the NZSE, rising to highs of NZ$1.67 and falling to the lows of NZ$1.41. 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 Air New Zealand's current trading price of NZ$1.51 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 Air New Zealand’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Air New Zealand still cheap?
Good news, investors! Air New Zealand is still a bargain right now. My valuation model shows that the intrinsic value for the stock is NZ$2.11, but it is currently trading at NZ$1.51 on the share market, meaning that there is still an opportunity to buy now. However, given that Air New Zealand’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Air New Zealand 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. In the upcoming year, Air New Zealand's earnings are expected to increase by 42%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Since AIR is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on AIR for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AIR. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.
If you want to dive deeper into Air New Zealand, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Air New Zealand has 1 warning sign and it would be unwise to ignore it.
If you are no longer interested in Air New Zealand, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Valuation is complex, but we're helping make it simple.
Find out whether Air New Zealand is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Air New Zealand
Air New Zealand Limited provides passenger and cargo transportation services on scheduled airlines primarily in New Zealand, Australia, the Pacific Islands, the United Kingdom, Europe, Asia, and the United States.
Reasonable growth potential and slightly overvalued.