Is Fly Leasing Limited (NYSE:FLY) Potentially Undervalued?

By
Simply Wall St
Published
October 27, 2020
NYSE:FLY

Fly Leasing Limited (NYSE:FLY), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NYSE over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Fly Leasing’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Fly Leasing

What is Fly Leasing worth?

Good news, investors! Fly Leasing is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Fly Leasing’s ratio of 1.18x is below its peer average of 18.19x, which indicates the stock is trading at a lower price compared to the Trade Distributors industry. Although, there may be another chance to buy again in the future. This is because Fly Leasing’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Fly Leasing?

earnings-and-revenue-growth
NYSE:FLY Earnings and Revenue Growth October 27th 2020

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. Though in the case of Fly Leasing, 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? Although FLY is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to FLY, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on FLY for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about Fly Leasing as a business, it's important to be aware of any risks it's facing. For example, Fly Leasing has 3 warning signs (and 2 which shouldn't be ignored) we think you should know about.

If you are no longer interested in Fly Leasing, 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. 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.
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