Is Now An Opportune Moment To Examine Singapore Airlines Limited (SGX:C6L)?

Singapore Airlines Limited (SGX:C6L) saw a significant share price rise of over 20% in the past couple of months on the SGX. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an 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 the opportunity still exists.

Check out our latest analysis for Singapore Airlines

Is Singapore Airlines Still Cheap?

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. 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 16.57x is currently trading slightly above its industry peers’ ratio of 12.79x, which means if you buy Singapore Airlines today, you’d be paying a relatively sensible price for it. And if you believe Singapore Airlines 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, it seems like Singapore Airlines’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Singapore Airlines?

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. Though in the case of Singapore Airlines, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? C6L seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on C6L, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on C6L for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on C6L should the price fluctuate below the industry PE ratio.

If you'd like to know more about Singapore Airlines as a business, it's important to be aware of any risks it's facing. When we did our research, we found 2 warning signs for Singapore Airlines (1 is a bit unpleasant!) that we believe deserve your full attention.

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.