Should Value Investors Consider Delta Air Lines (DAL) Stock?

Should Value Investors Consider Delta Air Lines (DAL)

Value investing is one of the most popular ways to find great stocks in any market environment. After all, who would not want to find stocks that are flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value? One way to find these companies is to look at several key metrics and financial ratios, which are crucial in the value stock selection process. Let’s put Delta Air Lines, Inc. ( DAL – Free Report ) stock into this equation and if it is a good choice for value-oriented investors right now, if investors subscribing to this methodology should look elsewhere for top picks: PE Ratio A key metric that value investors always look at the Price to Earnings Ratio, or PE for short. This is one of the most popular investors in the world, and is one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the ratio of PE ratio with: a) where this ratio has been in the past; (b) how it compares to the average for the industry / sector; and c) how it compares to the market as a whole. On this front, Delta Air Lines has a trailing twelve months PE ratio of 12.2, as you can see in the chart below: This level actually compares favorably with the market at large for the S & P 500 stands at about 22. If we focus on the long-term PE trend, Delta Air Lines five years. Further, the stock’s also compares favorably with the Zacks Airlines industry ‘S trailing 12 months PE ratio, which stands at 13.5. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. We should also note that Delta Air Lines has a PE ratio of just 9.9, so it is fair to say near term too. P / S Ratio Another key metric is the Price / Sales ratio. This approach is compared to the situation of its total sales, where it is considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings. Right now, Delta Air Lines has a P / S ratio of about 1. This is a bit less than the average S & P 500, which comes in at 3.5x right now. Also, we can see in the chart below, at some point in the history of trading. Broad Value Outlook In aggregate, Delta Air Lines currently has a Value Score of 20% of all stocks we cover this look. This makes Delta Air Lines a solid choice for value investors. What About the Stock Overall? Though Delta Air Lines might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of A and a Momentum Score of D. This gives DAL a Zacks VGM score – or its overarching fundamental grade – of A. (You can read more about the Zacks Style Scores here >> ) Meanwhile, the company’s recent earnings have been pretty discouraging. The current quarter has fewer estimates than the previous year. It has had a small impact on the consensus estimate, but it has been reduced by 14.6% in the past two months, while the full year estimate has gone down by 3%. You can see the consensus estimate trend and recent price action for the stock in the chart below: Delta Air Lines, Inc. Price and Consensus The bearish trend is why the stock has just got a Zacks Rank # 3 (Hold) and we are looking for in-line performance from the company in the near term. Bottom Line Delta Air Lines is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (top 30% out of more than 250 industries) further strengthens its growth potential. So, value investors might want to wait and see who they are, but that happens, this stock could be a compelling pick. Zacks Editor-in-Chief Goes “All In” on This Stock Full disclosure, Kevin Matras now has more than one. He believes in its short-term profit potential and its prospects for more than double by 2019. Download it free >>

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