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Is American Airlines (AAL) Stock Undervalued Right Now?

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While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

American Airlines (AAL - Free Report) is a stock many investors are watching right now. AAL is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 4.86. This compares to its industry's average Forward P/E of 7.90. AAL's Forward P/E has been as high as 18.17 and as low as -88.98, with a median of 7.71, all within the past year.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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 0.19. This compares to its industry's average P/S of 0.49.

Finally, our model also underscores that AAL has a P/CF ratio of 2.36. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. AAL's P/CF compares to its industry's average P/CF of 6.64. Within the past 12 months, AAL's P/CF has been as high as 26.90 and as low as 2.06, with a median of 4.81.

Allegiant (ALGT - Free Report) 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 sports a P/B ratio of 1.60 as well; this compares to its industry's price-to-book ratio of 4.71. In the past 52 weeks, ALGT's P/B has been as high as 1.88, as low as 0.98, with a median of 1.41.

These are just a handful of the figures considered in American Airlines and Allegiant's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that AAL and ALGT is an impressive value stock right now.


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American Airlines Group Inc. (AAL) - free report >>

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