How Does India’s Boeing 787 Safety Update Affect Spirit AeroSystems’ Current Valuation?

If you have been eyeing Spirit AeroSystems Holdings lately, you are definitely not alone. Investors are sizing up whether now is the right moment to make a move with this stock, given its intriguing price action and ongoing buzz in the aviation sector. Over the past year, Spirit AeroSystems has posted a robust 17.7% gain, and an even more impressive 98.2% over the last five years. While the past month and week have brought a dip of -5.8%, the positive longer-term performance hints at potential underlying growth drivers still at play.

Notable recent news includes regulators in India affirming there are no major safety issues in Air India's Boeing 787 fleet. While this may not be a headline-grabbing event for all investors, it is indicative of the kind of steady, operations-focused progress that helps maintain confidence in aerospace partners such as Spirit AeroSystems. These developments likely feed into the evolving risk perception around the stock, even as the market digests its most current outlook.

So, is Spirit AeroSystems undervalued at its latest close of $38.70? The answer is mixed. The company's valuation score currently sits at 2 out of 6, with points earned for being undervalued in two key checks. This is not an emphatic bargain indication, but it also does not rule out opportunity for savvy investors looking deeper.

Next, we will break down these valuation methods and what they reveal about the current price. We will also offer a perspective on how you can go beyond the numbers to truly gauge Spirit AeroSystems' value in your portfolio.

Spirit AeroSystems Holdings scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Spirit AeroSystems Holdings Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s dollars. This approach aims to answer what the business is worth right now based on expectations for how much cash it can generate in the future.

Spirit AeroSystems Holdings’ latest reported Free Cash Flow (FCF) is -$868.86 Million, reflecting recent operational challenges. Analyst forecasts provide specific estimates for the next several years, with cash flow expected to turn positive and reach around $303 Million by 2028. Beyond these five years, Simply Wall St extends projections based on reasonable growth estimates. Annual FCF is expected to climb steadily into the 2030s, but even by 2035, the forecasted FCF remains below $1 Billion per year.

Based on the 2 Stage Free Cash Flow to Equity model, Spirit AeroSystems’ estimated intrinsic value per share is $35.72. With a current share price of $38.70, the stock is trading at an 8.3% premium to its DCF-implied value. This suggests the market is slightly optimistic relative to the model’s assumptions.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Spirit AeroSystems Holdings.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Spirit AeroSystems Holdings's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Spirit AeroSystems Holdings Price vs Sales

For companies like Spirit AeroSystems Holdings that are not currently profitable, the Price-to-Sales (PS) ratio becomes a suitable valuation metric. Since earnings-based multiples like PE or PB can be misleading or negative during loss-making periods, PS gives investors a way to compare shares based on actual revenue being generated, regardless of profitability.

When considering how high or low a PS ratio should be, expectations for sales growth and perceived business risks both play major roles. Typically, fast-growing, stable companies can justify a higher PS multiple, while riskier or slower-growing companies tend to trade at lower multiples in the market.

As of now, Spirit AeroSystems trades on a PS ratio of 0.72x. That is well below both the Aerospace & Defense industry average of 2.78x and the peer group average of 2.94x. However, rather than relying only on these broad benchmarks, Simply Wall St also calculates a “Fair Ratio” based on a company’s unique profile, factoring in its sales growth, market cap, profit margins, and risk outlook. For Spirit AeroSystems, the Fair Ratio stands at 0.38x.

This Fair Ratio approach is a step up from simple comparisons, because it takes into account aspects specific to Spirit AeroSystems that may influence what is truly “fair” for the stock, instead of just what is typical for its sector or peers.

Since Spirit’s actual PS ratio of 0.72x is only slightly above its Fair Ratio of 0.38x, and this difference is more than the small threshold for “about right,” the stock appears to be somewhat overvalued on this metric at the moment.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Spirit AeroSystems Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let's introduce you to Narratives. A Narrative is your story behind the numbers, connecting what you believe about Spirit AeroSystems Holdings to your personal estimate of its future revenue, earnings, and margins, and finally linking those forecasts to a fair value.

Narratives make investing smarter and simpler by allowing you to support your view on a company with real financial scenarios. Available for everyone on Simply Wall St's Community page, Narratives are easy to create and are shared by millions of investors worldwide.

By comparing each Narrative’s fair value to the current share price, investors can see if their view suggests it is time to buy or sell. Narratives instantly update as new information, such as news or earnings announcements, becomes available, keeping your perspective relevant and up to date.

For example, someone might build a Narrative that Spirit AeroSystems Holdings is worth over $50 based on a rapid turnaround in profitability. Another investor might see fair value as below $30 due to ongoing industry risks and slower recovery.

Do you think there's more to the story for Spirit AeroSystems Holdings? Create your own Narrative to let the Community know!

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.

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