Positive Sentiment Still Eludes Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) Following 26% Share Price Slump

Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) shares have had a horrible month, losing 26% after a relatively good period beforehand. The recent drop has obliterated the annual return, with the share price now down 6.9% over that longer period.

Even after such a large drop in price, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 18x, you may still consider Sun Country Airlines Holdings as an attractive investment with its 12.7x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Sun Country Airlines Holdings could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for Sun Country Airlines Holdings

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Sun Country Airlines Holdings.

Is There Any Growth For Sun Country Airlines Holdings?

In order to justify its P/E ratio, Sun Country Airlines Holdings would need to produce sluggish growth that's trailing the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 23%. This means it has also seen a slide in earnings over the longer-term as EPS is down 32% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 44% each year as estimated by the seven analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 11% each year, which is noticeably less attractive.

In light of this, it's peculiar that Sun Country Airlines Holdings' P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

Sun Country Airlines Holdings' P/E has taken a tumble along with its share price. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Sun Country Airlines Holdings currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Sun Country Airlines Holdings that you should be aware of.

Of course, you might also be able to find a better stock than Sun Country Airlines Holdings. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.