Everybody loves high flyers and the “Magnificent Seven” in 2024. Yet, investors shouldn’t overlook great value opportunities like United Airlines (NASDAQ:UAL) stock. Even though the stock hasn’t taken flight yet, the evidence suggests that United Airlines is a thriving company.
Indeed, after a review of the relevant data points and news items, you might conclude that United Airlines stock is a bargain at any price. So, fasten your seat belt but leave your parachute behind as we consider the value proposition of United Airlines.
How Cheap Is UAL Stock? You’ll Be Amazed!
I’ll cite a couple of commonly used valuation metrics to prove my point right now. For one thing, United Airlines’ GAAP trailing 12-month price-to-earnings ratio is 5.68x. For comparison, the sector median P/E ratio is 24.6x. Now, that’s what I would call a major discount. United Airlines has a TTM price-to-sales ratio of 0.28x, compared to the sector median P/S ratio of 1.51x.
Of course, it’s possible for a company with an ultra-low P/E ratio and P/S ratio to be a value trap. Yet, United Airlines stock doesn’t have the trappings of a trap. The company is profitable, and has beaten Wall Street’s quarterly EPS forecasts for the past six quarters.
Moreover, in 2023’s fourth quarter, United Airlines’ total operating revenue grew 9.9% year over year to $13.6 billion. Maybe that’s not good enough for spoiled investors who want to see every business grow like a “Magnificent Seven” company. But then, the “Mag-7” stocks aren’t ridiculously cheap like UAL stock appears to be.
United Airlines: This Is What a Thriving Airline Looks Like
Even beyond the company’s YOY revenue improvement, there are clear signs that United Airlines is thriving and not just surviving. First, United Airlines announced that it’s expanding its Denver-based Flight Training Center.
This facility, according to United Airlines, is the “largest… of its kind in the world.” Amazingly, the Flight Training Center already has “more than 700,000 square feet of training space” and 46 “full-motion flight simulators.”
However, United Airlines just opened a new, 150,000-square-foot building at the Flight Training Center, giving the company the capacity to add 12 more flight simulators. Clearly, United Airlines expects the company to grow if it feels the need to train legions of airline pilots in a gigantic facility.
Another positive sign is that United Airlines disclosed a $2.6 billion terminal-renovation project in Houston. This project will expand 40 gates at Terminal B at George Bush Intercontinental Airport.
In the press release, United Airlines stated that the company “expects to create 1,500 United positions in Houston next year.” Ask yourself: Is this something a company would do if it’s struggling to survive? To me, it sounds like United Airlines is preparing for quarters or even years of expansion.
UAL Stock: Good Price, Good Prospects
Given the company’s revenue growth and recent track record of EPS beats, it’s surprising that United Airlines still trades at less than half of its 2018 peak. Perhaps it’s just not time for the market to focus on United Airlines yet, as investors are still obsessed with the “Mag-7.”
Soon enough, I expect that United Airlines will have its time to shine. Value seekers really ought to consider UAL stock while it’s still absurdly cheap. Surely, you’ll agree that United Airlines is not currently valued correctly, and it’s only a matter of time before the stock takes flight.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
