Is It Too Late To Consider Buying Singapore Airlines Limited (SGX:C6L)?

Singapore Airlines Limited (SGX:C6L) saw its share price hover around a small range of S$5.45 to S$5.98 over the last few weeks. But is this actually reflective of the share value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Singapore Airlines’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 Singapore Airlines

Is Singapore Airlines Still Cheap?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 45.85x is currently well-above the industry average of 10.92x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Singapore Airlines’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will Singapore Airlines 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. However, with a negative profit growth of -15% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Singapore Airlines. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? If you believe C6L is currently trading above its peers, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on C6L for some time, now may not be the best time to enter into the stock. Its price has risen beyond its industry peers, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?

If you want to dive deeper into Singapore Airlines, you'd also look into what risks it is currently facing. For example, we've found that Singapore Airlines has 2 warning signs (1 doesn't sit too well with us!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Singapore Airlines, 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.