Sep 24, 2020
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You Could Make Money With Delta Airlines

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BRAZIL – 2020/06/08: During this photo illustration the Delta Airlines logo seen displayed on a. [+] SOPA IMAGES/LIGHTROCKET VIA GETTY IMAGES Airline companies which includes Delta Airlines (NYSE: DAL) have seen their demand and consequently their stocks fall drastically this year. Moreover their debt and leverage have gone up significantly. One could term buying Delta s stock right now a touch risky bet but it may also result in upside for those willing to attend out the pandemic


Not convinced? This is another reason. Delta was trading cheaply and was a great bet even before the pandemic hit. Its stock has only fallen since then and it is just an issue of time before the demand rebounds completely. Our dashboard Delta Airlines Is Trading Cheaply briefly summarizes why Delta is an effective buying opportunity


To cut an extended story short despite showing consistent growth and relatively higher profitability when compared with its peers the stock has been trading at a lower multiple. The market simply needs to acknowledge this mis-pricing. So why do we are saying Delta is trading cheaply? There are 3 reasons


First On the end of 2019 Delta s stock was trading at $58 that’s twice the figure that it is trading at now (as of Aug 18 2020). That s 50% lower right there even though air travel is an important service that is more likely to rebound fully once the pandemic impact wanes


Second on the end of 2019 Delta s stock price implied a trailing EV/EBITDA multiple of 5. 2 which was almost 10% below a year before. When compared with Delta its peers AAL LUV and UAL were trading at a significantly higher multiples of 6. 6 7. 5 and 6


1 respectively. If we take profitable players and check out EV/EBITDA of the entire industry we discover Delta again lagging behind – 5. 2 for Delta vs 6. 54 for the industry. Third this lower multiple is despite consistent growth (~ 19% within the last 3 years) and relatively higher operating margins


Delta s operating margin in 2019 stood at 13. 4% vs just 6. 9% for Alaska 6. 7% for American 12. 8% for Southwes t and 8. 8% for United. Considering the above we expect that as demand rebounds Delta is probably going to provide good returns to investors. So Delta Airlines might give good returns from current levels


But what in case you re looking for a more balanced portfolio instead? Here s a first-class portfolio to outperform the market with 170% return since 2016 versus 55% for the S&P 500. Produced from companies with strong revenue growth healthy profits quite a few cash and occasional risk. It has outperformed the broader market year after year consistently


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