JetBlue Airways Corporation (NASDAQ:JBLU), which is in the airlines business, and is based in United States, received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$19.69 at one point, and dropping to the lows of US$16.02. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether JetBlue Airways's current trading price of US$16.85 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at JetBlue Airways’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is JetBlue Airways worth?
According to my relative valuation model, the stock seems to be currently fairly priced. 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 JetBlue Airways’s ratio of 11.7x is trading slightly above its industry peers’ ratio of 8.81x, which means if you buy JetBlue Airways today, you’d be paying a relatively fair price for it. And if you believe that JetBlue Airways 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, JetBlue Airways’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What kind of growth will JetBlue Airways generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. JetBlue Airways’s earnings over the next few years are expected to increase by 61%, 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? It seems like the market has already priced in JBLU’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at JBLU? 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 an eye on JBLU, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for JBLU, 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 JetBlue Airways. You can find everything you need to know about JetBlue Airways in the latest infographic research report. If you are no longer interested in JetBlue Airways, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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If you spot an error that warrants correction, please contact the editor at email@example.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.