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Is United Airlines (UAL) Stock Undervalued Right Now?

Zacks Equity Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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 to watch right now is United Airlines (UAL). UAL is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 6.84 right now. For comparison, its industry sports an average P/E of 7.93. Over the past year, UAL's Forward P/E has been as high as 9.80 and as low as 6.71, with a median of 7.75.

We also note that UAL holds a PEG ratio of 0.31. 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 industry currently sports an average PEG of 0.42. Over the last 12 months, UAL's PEG has been as high as 0.47 and as low as 0.30, with a median of 0.37.

We should also highlight that UAL has a P/B ratio of 2.08. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 2.30. Over the past 12 months, UAL's P/B has been as high as 2.85 and as low as 2.03, with a median of 2.34.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. UAL has a P/S ratio of 0.5. This compares to its industry's average P/S of 0.6.

Finally, investors will want to recognize that UAL has a P/CF ratio of 4.48. 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 company's current P/CF looks solid when compared to its industry's average P/CF of 5.46. Over the past year, UAL's P/CF has been as high as 6.02 and as low as 4.37, with a median of 5.20.

These figures are just a handful of the metrics value investors tend to look at, but they help show that United Airlines is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, UAL feels like a great value stock at the moment.


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