At US$23.55, Is It Time To Put SkyWest, Inc. (NASDAQ:SKYW) On Your Watch List?

While SkyWest, Inc. (NASDAQ:SKYW) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$32.43 and falling to the lows of US$22.96. 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 SkyWest's current trading price of US$23.55 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 SkyWest’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for SkyWest

Is SkyWest still cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare 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 SkyWest’s ratio of 12.69x is trading slightly below its industry peers’ ratio of 16.09x, which means if you buy SkyWest today, you’d be paying a reasonable price for it. And if you believe that SkyWest should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since SkyWest’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.

What does the future of SkyWest look like?

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. SkyWest's earnings over the next few years are expected to increase by 23%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in SKYW’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at SKYW? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on SKYW, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for SKYW, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about SkyWest as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for SkyWest (1 is a bit concerning) you should be familiar with.

If you are no longer interested in SkyWest, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.