U.S. Markets closed

Is Fly Leasing Limited (NYSE:FLY) Potentially Undervalued?

Simply Wall St

Fly Leasing Limited (NYSE:FLY), which is in the trade distributors business, and is based in Ireland, saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Fly Leasing’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Fly Leasing

What's the opportunity in Fly Leasing?

Great news for investors – Fly Leasing is still trading at a fairly cheap price. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Fly Leasing’s ratio of 3.44x is below its peer average of 17.9x, which suggests the stock is undervalued compared to the Trade Distributors industry. What’s more interesting is that, Fly Leasing’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Fly Leasing?

NYSE:FLY Past and Future Earnings, November 15th 2019

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Fly Leasing, at least in the near future.

What this means for you:

Are you a shareholder? Although FLY is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to FLY, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on FLY for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Fly Leasing. You can find everything you need to know about Fly Leasing in the latest infographic research report. If you are no longer interested in Fly Leasing, 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.