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What Does Allegiant Travel Company's (NASDAQ:ALGT) Share Price Indicate?

Simply Wall St

Allegiant Travel Company (NASDAQ:ALGT), which is in the airlines business, and is based in United States, saw a decent share price growth in the teens level on the NASDAQGS over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Allegiant Travel’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Allegiant Travel

Is Allegiant Travel still cheap?

According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 13.24x is currently trading slightly above its industry peers’ ratio of 9.14x, which means if you buy Allegiant Travel today, you’d be paying a relatively reasonable price for it. And if you believe that Allegiant Travel should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Furthermore, it seems like Allegiant Travel’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Allegiant Travel look like?

NasdaqGS:ALGT Past and Future Earnings, September 21st 2019

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Allegiant Travel’s earnings over the next few years are expected to increase by 37%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? ALGT’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at ALGT? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on ALGT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for ALGT, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Allegiant Travel. You can find everything you need to know about Allegiant Travel in the latest infographic research report. If you are no longer interested in Allegiant Travel, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.