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Qantas Airways Limited (ASX:QAN), is not the largest company out there, but it received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to AU$6.46 at one point, and dropping to the lows of AU$5.78. 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 Qantas Airways' current trading price of AU$6.32 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Qantas Airways’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Qantas Airways
Is Qantas Airways Still Cheap?
Good news, investors! Qantas Airways is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We’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 6.26x is currently well-below the industry average of 9.11x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Qantas Airways’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 Qantas Airways look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 3.9% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Qantas Airways, at least in the short term.
What This Means For You
Are you a shareholder? Even though growth is relatively muted, since QAN is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on QAN for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy QAN. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.