Are Investors Undervaluing Delta Air Lines (DAL) Right Now?

DAL UAL

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, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One stock to keep an eye on is Delta Air Lines (DAL - Free Report) . DAL is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 6.27 right now. For comparison, its industry sports an average P/E of 7.73. Over the past 52 weeks, DAL's Forward P/E has been as high as 11.63 and as low as 5.59, with a median of 6.92.

Investors will also notice that DAL has a PEG ratio of 0.17. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. DAL's PEG compares to its industry's average PEG of 0.24. Within the past year, DAL's PEG has been as high as 0.21 and as low as 0.16, with a median of 0.18.

Another notable valuation metric for DAL is its P/B ratio of 3.58. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 4.61. Within the past 52 weeks, DAL's P/B has been as high as 5.95 and as low as 3.08, with a median of 3.86.

Finally, our model also underscores that DAL has a P/CF ratio of 5.68. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. DAL's P/CF compares to its industry's average P/CF of 6.50. Over the past 52 weeks, DAL's P/CF has been as high as 11.06 and as low as 5.23, with a median of 7.18.

United Airlines (UAL - Free Report) may be another strong Transportation - Airline stock to add to your shortlist. UAL is a # 1 (Strong Buy) stock with a Value grade of A.

Shares of United Airlines are currently trading at a forward earnings multiple of 4.64 and a PEG ratio of 0.10 compared to its industry's P/E and PEG ratios of 7.73 and 0.24, respectively.

Over the last 12 months, UAL's P/E has been as high as 18.44, as low as 4.51, with a median of 6.13, and its PEG ratio has been as high as 0.11, as low as 0.10, with a median of 0.11.

United Airlines sports a P/B ratio of 2.26 as well; this compares to its industry's price-to-book ratio of 4.61. In the past 52 weeks, UAL's P/B has been as high as 3.32, as low as 1.76, with a median of 2.40.

Value investors will likely look at more than just these metrics, but the above data helps show that Delta Air Lines and United Airlines are likely undervalued currently. And when considering the strength of its earnings outlook, DAL and UAL sticks out as one of the market's strongest value stocks.

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