Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) Might Not Be As Mispriced As It Looks After Plunging 33%

Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) shareholders that were waiting for something to happen have been dealt a blow with a 33% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 44% share price drop.

In spite of the heavy fall in price, Sun Country Airlines Holdings may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 7.5x, since almost half of all companies in the United States have P/E ratios greater than 18x and even P/E's higher than 32x are not unusual. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Sun Country Airlines Holdings has been doing quite well of late. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for Sun Country Airlines Holdings

Keen to find out how analysts think Sun Country Airlines Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Sun Country Airlines Holdings' Growth Trending?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Sun Country Airlines Holdings' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 39% gain to the company's bottom line. Pleasingly, EPS has also lifted 1,003% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Looking ahead now, EPS is anticipated to climb by 18% per year during the coming three years according to the five analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 10.0% per 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 Final Word

Sun Country Airlines Holdings' P/E looks about as weak as its stock price lately. 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. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

You always need to take note of risks, for example - Sun Country Airlines Holdings has 2 warning signs we think 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.