Is Singapore Airlines Limited’s (SGX:C6L) Future Growth Already Accounted For In Today’s Price?

Singapore Airlines Limited (SGX:C6L) is considered a high growth stock. However its last closing price of SGD9.51 left investors wondering whether this growth has already been factored into the share price. Let’s look into this by assessing C6L’s expected growth over the next few years.

See our latest analysis for Singapore Airlines

Has the C6L train has slowed down?

Singapore Airlines is poised for extremely high earnings growth in the near future. The consensus forecast from 15 analysts is extremely positive with earnings forecasted to rise significantly from today’s level of SGD0.387 to SGD0.692 over the next three years. This results in an annual growth rate of 17%, on average, which illustrates a highly optimistic outlook in the near term.

Can C6L’s share price be justified by its earnings growth?

Singapore Airlines is available at price-to-earnings ratio of 24.55x, showing us it is overvalued based on current earnings compared to the airlines industry average of 10.2x , and overvalued compared to the SG market average ratio of 11.99x .

SGX:C6L PE PEG Gauge December 2nd 18
SGX:C6L PE PEG Gauge December 2nd 18

We understand C6L seems to be overvalued based on its current earnings, compared to its industry peers. However, seeing as Singapore Airlines is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 24.55x and expected year-on-year earnings growth of 17% give Singapore Airlines a higher PEG ratio of 1.46x. This tells us that when we include its growth in our analysis Singapore Airlines’s stock can be considered slightly overvalued , based on the fundamentals.

What this means for you:

C6L’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Are C6L’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has C6L been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of C6L’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.