Is SkyWest Poised for Growth After Recent 16.7% Pullback in 2025?

If you are trying to decide what to do with SkyWest stock right now, you are not alone. After a remarkable three-year run that saw shares soar a jaw-dropping 465.7%, and a very strong five-year total return of 217.7%, it's no wonder that many investors are wondering what could be ahead for this regional airline, especially with the broader market dynamics shifting. SkyWest's 1-year return of 19.8% still looks solid, though recent turbulence has set in. The stock dipped -1.5% over the past week and has come down -16.7% in the last 30 days, showing that sentiment might be shifting or that investors are re-assessing risk.

Some of these moves mirror broader aviation sector developments, with ongoing changes in travel demand and rising costs weighing on the group in the short term. Yet, underneath the surface-level swings, SkyWest's valuation is starting to catch the eye of serious stock pickers. According to a widely used value scoring system, SkyWest checks the box for being undervalued in 5 out of 6 categories, giving it a robust value score of 5 and signaling potential opportunity for patient investors.

So, how does SkyWest actually stack up on valuation right now, and what does that mean for someone thinking of buying, holding, or selling the stock? In this next section, we break down the most common ways valuation is measured and why one approach, which we will reveal at the end, could be even more informative for long-term investors.

Why SkyWest is lagging behind its peers

Approach 1: SkyWest Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a foundational valuation approach that estimates a company's intrinsic value by forecasting its future cash flows and then discounting those back to today's dollars. In SkyWest's case, the DCF employed is a two-stage Free Cash Flow to Equity model. This means it considers initial analyst cash flow projections before extrapolating them into the more distant future.

SkyWest generated $312.5 million in free cash flow over the last twelve months, and analysts project this figure will grow steadily in the years ahead. By 2027, free cash flow is expected to reach $546 million. Projections for the following years show a continued, gradual rise, with estimated free cash flow growing to around $730.8 million by 2035, according to Simply Wall St.'s in-house calculations.

After discounting these future cash flows back to the present, the model arrives at an intrinsic fair value of $207.27 per share. This figure is 51.7% higher than the current market price, suggesting that SkyWest stock is significantly undervalued at today's levels.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests SkyWest is undervalued by 51.7%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: SkyWest Price vs Earnings

The price-to-earnings (PE) ratio is widely used to value profitable companies like SkyWest, as it shows how much investors are willing to pay for each dollar of earnings. A reasonable PE ratio typically reflects not only the company’s current profitability, but also future growth prospects and the perceived risk in its business model. High expected earnings growth can justify a higher PE ratio, while increased uncertainty or risk generally puts pressure on this number.

SkyWest currently trades at a PE ratio of 9.9x. This is almost exactly in line with the average PE for the airline industry, which is currently 9.2x, and is well below the peer average of 20.6x. While comparing with industry averages and peers is a helpful starting point, it does not always capture company-specific factors such as SkyWest’s growth outlook or risk profile.

That is where Simply Wall St’s “Fair Ratio” comes in. The Fair Ratio for SkyWest is calculated at 10.8x, reflecting a blend of factors such as earnings growth potential, profit margins, SkyWest’s position in the airlines sector, and its market cap. This proprietary metric provides a more tailored benchmark than a simple peer or industry comparison, making it especially useful for investors seeking a refined view on value.

Since SkyWest’s actual PE ratio of 9.9x is just below its Fair Ratio of 10.8x, this suggests the stock is modestly undervalued, with the market not fully pricing in its expected performance or strengths.

Result: UNDERVALUED

PE 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 SkyWest Narrative

Earlier, we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple but powerful approach that lets you connect the story you see unfolding for a company, such as your expectations for SkyWest's future revenue growth, margins, and risks, with a financial forecast and a personalized fair value estimate.

Rather than relying only on ratios or analyst numbers, Narratives allow investors to outline their own view, linking their assumptions directly to what they believe the stock is worth, and then see how this stacks up against the current market price. On Simply Wall St’s Community page, creating or exploring Narratives is easy and accessible, making it possible for anyone, from beginners to experienced investors, to understand and compare different perspectives in real time.

The real advantage is that these Narratives get updated dynamically as new information emerges, whether it is fresh news, company results, or big industry shifts, so your investment decision is always based on the latest facts. For example, one SkyWest Narrative might forecast robust regional expansion and set a fair value of $207 per share. A more cautious investor could focus on pilot shortages and regulatory risks and see a value closer to $132, helping you clearly see where you stand and make smarter buy or sell decisions.

Do you think there's more to the story for SkyWest? 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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