Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Airlines industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Airlines Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Airlines Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Airlines industry for Friday, September 27, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Airlines industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

ANA Holdings Inc - ADR’s Value Grade

Value Grade:

ANA Holdings Inc is a Japan-based holding company principally engaged in the aviation business. The Company operates through four business segments. The Aviation segment conducts regular and irregular air transportation of passengers and cargo domestic and international flights. The Aviation-related segment provides services associated with air transportation such as airport handling and maintenance, and various services at the airport to customers and provide reservation information services by telephone. The Travel segment is engaged in the development and sale of packaged travel products, mainly made from airline tickets and accommodation. The Trading Companies segment mainly engaged in the import and export of aviation-related materials and mail orders. It is also engaged in the building management and temporary staffing business.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

ANA Holdings Inc - ADR has a Value Score of 94, which is considered to be undervalued.

When you look at ANA Holdings Inc - ADR’s price-to-sales ratio at 0.69 compared to the industry median at 0.27, this company has a higher price relative to revenue compared to its peers. This could make ANA Holdings Inc - ADR’s stock less attractive for value investors.

ANA Holdings Inc - ADR’s price-earnings ratio is 10.64 compared to the industry median at 9.04. This means it has a higher share price relative to earnings compared to its peers. This could make ANA Holdings Inc - ADR less attractive for value investors.

Now, let’s assess ANA Holdings Inc - ADR’s EV/EBITDA ratio, also known as enterprise multiple. At 6.4, when compared to the industry median of 6.6, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. ANA Holdings Inc - ADR’s shareholder yield is higher than its industry median ratio of 0.11%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. ANA Holdings Inc - ADR’s price-to-book ratio is higher than its industry median ratio of 1.34. This could make ANA Holdings Inc - ADR less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at ANA Holdings Inc - ADR’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. ANA Holdings Inc - ADR’s price-to-free-cash-flow ratio is higher than its industry median ratio of 6.97. This could make ANA Holdings Inc - ADR less attractive because the higher P/FCF ratio indicates that ANA Holdings Inc - ADR is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

SkyWest Inc’s Value Grade

Value Grade:

SkyWest, Inc. is the holding company for SkyWest Airlines, Inc. (SkyWest Airlines) and SkyWest Leasing, Inc. (SkyWest Leasing), an aircraft leasing company. The Company operates through two segments: SkyWest Airlines and SWC, and SkyWest Leasing. SkyWest Airlines offers scheduled passenger service to destinations in the United States, Canada and Mexico. The Company's flights are operated as United Express, Delta Connection, American Eagle or Alaska Airlines flights under code-share agreements with United Airlines, Inc., Delta Air Lines, Inc., American Airlines, Inc. or Alaska Airlines, Inc., respectively. SkyWest Airlines has a fleet of approximately 500 aircraft. SkyWest Charter, LLC (SWC) offers on-demand charter service using CRJ200 aircraft in a 30-seat configuration. SkyWest Leasing finances new aircraft with debt under its capacity purchase agreements, consisting of its E175 aircraft. SkyWest Leasing is also engaged in leasing aircraft and engines to third parties.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

SkyWest Inc has a Value Score of 80, which is considered to be undervalued.

SkyWest Inc’s price-earnings ratio is 19.8 compared to the industry median at 9.0. This means that it has a higher price relative to its earnings compared to its peers. This makes SkyWest Inc less attractive for value investors.

SkyWest Inc’s price-to-book ratio is lower than its peers. This could make SkyWest Inc more attractive for value investors when compared to the industry median at 1.34.

You can read more about SkyWest Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

United Airlines Holdings Inc’s Value Grade

Value Grade:

United Airlines Holdings, Inc. is a holding company. The Company transports people and cargo throughout North America and to destinations in Asia, Europe, Africa, the Pacific, the Middle East and Latin America. The Company, through its wholly owned subsidiary, United Airlines, Inc., and its regional carriers, operates across six continents, with hubs at Chicago O'Hare International Airport (ORD), Denver International Airport (DEN), George Bush Intercontinental Airport (IAH), Los Angeles International Airport (LAX), Newark Liberty International Airport (EWR), San Francisco International Airport (SFO), Washington Dulles International Airport (IAD) and A.B. Won Pat International Airport (GUM). Its hub and spoke system allows it to transport passengers between various destinations with frequent services. The Company has contractual relationships with various regional carriers to provide regional aircraft service branded as United Express.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

United Airlines Holdings Inc has a Value Score of 87, which is considered to be undervalued.

United Airlines Holdings Inc’s price-earnings ratio is 7.3 compared to the industry median at 9.0. This means that it has a lower price relative to its earnings compared to its peers. This makes United Airlines Holdings Inc more attractive for value investors.

United Airlines Holdings Inc’s price-to-book ratio is lower than its peers. This could make United Airlines Holdings Inc more attractive for value investors when compared to the industry median at 1.34.

You can read more about United Airlines Holdings Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Airlines Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Airlines stocks as well as other industrys.

Choosing Which of the 3 Best Airlines Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• ANA Holdings Inc - ADR stock has a Value Grade of A.
• SkyWest Inc stock has a Value Grade of B.
• United Airlines Holdings Inc stock has a Value Grade of A.

Now that you have a bit more background about each of the 3 undervalued stocks in the Airlines industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Airlines Stocks

Want to learn more about Airlines stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Airlines Stocks for Friday, September 27
• Why Alaska Air Group, Inc.’s (ALK) Stock Is Up 4.71%
• Why Allegiant Travel Company’s (ALGT) Stock Is Up 5.78%
• Why American Airlines Group Inc’s (AAL) Stock Is Up 7.18%

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.