Is There Now An Opportunity In Allegiant Travel Company (NASDAQ:ALGT)?

Allegiant Travel Company (NASDAQ:ALGT), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$151 and falling to the lows of US$102. 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 Allegiant Travel's current trading price of US$102 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Allegiant Travel’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Allegiant Travel

What's The Opportunity In Allegiant Travel?

Allegiant Travel is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison 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 Allegiant Travel’s ratio of 40.39x is above its peer average of 22.39x, which suggests the stock is trading at a higher price compared to the Airlines industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Allegiant Travel’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Allegiant Travel?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Allegiant Travel's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in ALGT’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe ALGT should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ALGT for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for ALGT, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Allegiant Travel, you'd also look into what risks it is currently facing. Our analysis shows 4 warning signs for Allegiant Travel (1 is a bit unpleasant!) and we strongly recommend you look at these before investing.

If you are no longer interested in Allegiant Travel, 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. 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.