Advertisement
New Zealand markets closed
  • NZX 50

    11,946.43
    +143.15 (+1.21%)
     
  • NZD/USD

    0.5935
    +0.0001 (+0.01%)
     
  • ALL ORDS

    7,937.50
    -0.40 (-0.01%)
     
  • OIL

    82.93
    -0.43 (-0.52%)
     
  • GOLD

    2,329.10
    -13.00 (-0.56%)
     

Should You Investigate Delta Air Lines, Inc. (NYSE:DAL) At US$39.58?

Today we're going to take a look at the well-established Delta Air Lines, Inc. (NYSE:DAL). The company's stock led the NYSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Delta Air Lines’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Delta Air Lines

What's The Opportunity In Delta Air Lines?

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. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 19.22x is currently trading slightly below its industry peers’ ratio of 20.95x, which means if you buy Delta Air Lines today, you’d be paying a decent 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. Is there another opportunity to buy low in the future? Since Delta Air Lines’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 Delta Air Lines look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. 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. With profit expected to more than double over the next couple of years, the future seems bright for Delta Air Lines. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

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 track record of its management team. Have these factors changed since the last time you looked at DAL? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

ADVERTISEMENT

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

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Delta Air Lines.

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.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here