Is There Now An Opportunity In Delta Air Lines, Inc. (NYSE:DAL)?

Today we're going to take a look at the well-established Delta Air Lines, Inc. (NYSE:DAL). The company's stock saw significant share price movement during recent months on the NYSE, rising to highs of US$48.69 and falling to the lows of US$36.45. 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 Delta Air Lines' current trading price of US$35.24 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Delta Air Lines’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 Delta Air Lines

What Is Delta Air Lines Worth?

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 Delta Air Lines’s ratio of 7.55x is trading slightly below its industry peers’ ratio of 10.3x, which means if you buy Delta Air Lines today, you’d be paying a reasonable price for it. And if you believe Delta Air Lines should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Delta Air Lines’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Delta Air Lines look like?

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. Delta Air Lines' earnings over the next few years are expected to increase by 66%, 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? DAL’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at DAL? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on DAL, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for DAL, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. You'd be interested to know, that we found 2 warning signs for Delta Air Lines and you'll want to know about them.

If you are no longer interested in Delta Air Lines, 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.