Should Value Investors Buy American Airlines (AAL) Stock?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One stock to keep an eye on is American Airlines (AAL). AAL is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 6.75, which compares to its industry's average of 18.13. Over the past year, AAL's Forward P/E has been as high as 7.76 and as low as 4.01, with a median of 5.74.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. AAL has a P/S ratio of 0.15. This compares to its industry's average P/S of 0.37.
Allegiant (ALGT) may be another strong Transportation - Airline stock to add to your shortlist. ALGT is a # 2 (Buy) stock with a Value grade of A.
Allegiant is trading at a forward earnings multiple of 11.80 at the moment, with a PEG ratio of 0.98. This compares to its industry's average P/E of 18.13 and average PEG ratio of 1.07.
ALGT's Forward P/E has been as high as 12.70 and as low as 5.77, with a median of 9.55. During the same time period, its PEG ratio has been as high as 1.54, as low as 0.68, with a median of 0.92.
Furthermore, Allegiant holds a P/B ratio of 0.80 and its industry's price-to-book ratio is 4.81. ALGT's P/B has been as high as 1.16, as low as 0.50, with a median of 0.84 over the past 12 months.
These are only a few of the key metrics included in American Airlines and Allegiant strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, AAL and ALGT look like an impressive value stock at the moment.
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American Airlines Group Inc. (AAL) : Free Stock Analysis Report
Allegiant Travel Company (ALGT) : Free Stock Analysis Report