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Are Investors Undervaluing United Continental (UAL) Right Now?

Zacks Equity Research
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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One company value investors might notice is United Continental (UAL). UAL is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 7.50 right now. For comparison, its industry sports an average P/E of 8.88. Over the past 52 weeks, UAL's Forward P/E has been as high as 9.80 and as low as 6.72, with a median of 8.21.

We also note that UAL holds a PEG ratio of 0.36. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. UAL's PEG compares to its industry's average PEG of 0.39. Over the past 52 weeks, UAL's PEG has been as high as 0.47 and as low as 0.32, with a median of 0.39.

Investors should also recognize that UAL has a P/B ratio of 2.34. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 2.77. Over the past 12 months, UAL's P/B has been as high as 2.85 and as low as 2.08, with a median of 2.39.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. UAL has a P/S ratio of 0.55. This compares to its industry's average P/S of 0.61.

Finally, investors should note that UAL has a P/CF ratio of 5.18. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 6.14. Over the past 52 weeks, UAL's P/CF has been as high as 6.02 and as low as 4.52, with a median of 5.26.

Value investors will likely look at more than just these metrics, but the above data helps show that United Continental is likely undervalued currently. And when considering the strength of its earnings outlook, UAL sticks out at as one of the market's strongest value stocks.


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