What Is Singapore Airlines Limited's (SGX:C6L) Share Price Doing?

Today we're going to take a look at the well-established Singapore Airlines Limited (SGX:C6L). The company's stock saw significant share price movement during recent months on the SGX, rising to highs of S$7.91 and falling to the lows of S$6.72. 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 Singapore Airlines' current trading price of S$6.87 reflective of the actual 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

What's The Opportunity In Singapore Airlines?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 16.54x is currently trading slightly above its industry peers’ ratio of 13.36x, which means if you buy Singapore Airlines today, you’d be paying a relatively sensible price for it. And if you believe that Singapore Airlines should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. 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.

What kind of growth will Singapore Airlines generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Singapore Airlines, at least in the near future.

What This Means For You

Are you a shareholder? Currently, C6L appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk 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 gel your views on C6L should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Singapore Airlines at this point in time. Be aware that Singapore Airlines is showing 2 warning signs in our investment analysis and 1 of those makes us a bit uncomfortable...

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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.