Let's talk about the popular Singapore Airlines Limited (SGX:C6L). The company's shares saw significant share price movement during recent months on the SGX, rising to highs of S$5.50 and falling to the lows of S$5.00. 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 Singapore Airlines' current trading price of S$5.46 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 Singapore Airlines’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is Singapore Airlines Worth?
Singapore Airlines is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison 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 43.92x is currently well-above the industry average of 9.06x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that Singapore Airlines’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.
Can we expect growth from Singapore Airlines?
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. Though in the case of Singapore Airlines, it is expected to deliver a negative earnings growth of -9.8%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? If you believe C6L is currently trading above its peers, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to de-risk your portfolio. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on C6L for some time, now may not be the best time to enter into the stock. The price has climbed past its industry peers, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?
If you'd like to know more about Singapore Airlines as a business, it's important to be aware of any risks it's facing. For example, Singapore Airlines has 2 warning signs (and 1 which is a bit concerning) we think you should know about.
If you are no longer interested in Singapore Airlines, 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.
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