Spirit AeroSystems (SPR): Assessing Valuation After Q3 Losses Widen Despite Higher Sales

Spirit AeroSystems Holdings (SPR) has drawn attention after its latest third-quarter earnings report. Sales ticked higher year over year, but a significantly larger net loss highlights ongoing financial hurdles for the company.

See our latest analysis for Spirit AeroSystems Holdings.

After reporting a steeper net loss along with modest revenue growth, Spirit AeroSystems Holdings’ share price has dipped over the past month and quarter, reflecting investor caution as supply-chain headwinds linger for key partners like Airbus. Still, with a 9.4% year-to-date share price return and a solid 11.5% total shareholder return for the past year, the stock’s long-term momentum remains intact despite some near-term volatility.

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With recent earnings revealing both resilient revenue growth and a widening net loss, investors are left wondering: is Spirit AeroSystems now trading below its true worth, or is the market already factoring in all future growth potential?

Price-to-Sales Ratio of 0.7x: Is it justified?

Compared to its last close of $36.69, Spirit AeroSystems’ price-to-sales ratio stands out as exceptionally low. This signals that investors are currently pricing the stock much cheaper than its US Aerospace & Defense peers.

The price-to-sales (P/S) ratio measures how much investors are willing to pay for each dollar of company revenue. For Spirit AeroSystems, a P/S ratio of 0.7x suggests the stock is trading at well below its sector’s average. This could indicate the market is overlooking future revenue potential, or it may be pricing in heavy risks tied to ongoing losses.

Relative to the industry average P/S of 3x, Spirit AeroSystems appears significantly discounted. However, compared with the estimated fair P/S ratio of 0.4x for the stock, the current valuation may still overstate its financial quality and future prospects. The gap between the actual and fair ratio could be an important signal for where market sentiment might head next.

Explore the SWS fair ratio for Spirit AeroSystems Holdings

Result: Price-to-Sales Ratio of 0.7x (UNDERVALUED)

However, persistent net losses and ongoing supply chain uncertainties could affect Spirit AeroSystems’ recovery and dampen investor enthusiasm in the short term.

Find out about the key risks to this Spirit AeroSystems Holdings narrative.

Another View: Discounted Cash Flow Analysis

Looking at Spirit AeroSystems through the lens of our DCF model tells a very different story. The SWS DCF model estimates fair value at $249.71 per share. The current price sits 85% below this level, which points strongly to undervaluation based on long-term cash flows.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Spirit AeroSystems Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 832 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Spirit AeroSystems Holdings Narrative

If you want to see things from a different angle or prefer to interpret the data on your own terms, you can quickly build your own perspective in just a few minutes, and Do it your way.

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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.

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