American Airlines (AAL) Valuation Spotlight After Upbeat Q3 Earnings and Raised Guidance

American Airlines (AAL) shares saw renewed interest after the company reported third quarter earnings that matched revenue expectations and included a smaller loss than many anticipated. Investors are now watching upcoming trends with extra curiosity.

See our latest analysis for American Airlines Group.

With third quarter results providing a boost, American Airlines Group’s shares have enjoyed a solid rebound this month, climbing with a 13.7% one-month share price return. While the year-to-date share price is still down nearly 25%, investors are responding positively to recent earnings, improved commercial momentum, and a promising new leadership appointment. Even with some of the turbulence seen over the past year, the company’s one-year total shareholder return of -4.6% and five-year total return of 10.2% show the kind of resilience and long-term perspective that is top of mind for the market right now.

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With shares on the rise after upbeat earnings and new leadership, the big question now is whether American Airlines remains undervalued or if the recent rally means investors have already accounted for future growth opportunities.

Most Popular Narrative: 20.5% Overvalued

The most-followed narrative on American Airlines, according to PittTheYounger, suggests the stock is trading well above its fair value estimate of $10.61, with the last close at $12.78. This gap highlights how the narrative drivers focus less on short-term news and more on fundamental structural concerns.

There’s a single reason why American is the least attractive of US legacy carriers (in terms of investing, anyway): its balance sheet. If most airlines and certainly those in the US are loaded up to the hilt with debt, American goes so far as to boast negative equity. Any startup would go belly-up with a balance sheet such as this one.

Read the complete narrative.

Curious about why this valuation stands out? The key to this narrative is not just debt; a carefully modeled mix of segment growth, margin assumptions, and ambitious future profit multiples holds the answer. Ready to see which numbers could turn this perceived “ugly duckling” into a contrarian bet? Only the full narrative reveals the math behind the fair value calculation.

Result: Fair Value of $10.61 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, if premium offerings succeed or economic optimism returns, these factors could rapidly strengthen American Airlines’ position and challenge the prevailing overvaluation story.

Find out about the key risks to this American Airlines Group narrative.

Another View: Discounted Cash Flow Model

Looking through a different lens, the SWS DCF model points to a markedly divergent story. It calculates American Airlines’ fair value at $19.54, meaning shares are trading around 34.6% below this estimate. This implies the stock may be undervalued, standing in direct contrast to the overvaluation flagged by the previous method. Which perspective holds more weight for investors as the market digests new data?

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 American Airlines Group 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 850 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 American Airlines Group Narrative

If you see things differently or want to dive into the details yourself, you can craft your own narrative in just a few minutes. Do it your way

A great starting point for your American Airlines Group research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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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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