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Should Value Investors Buy United Airlines (UAL) Stock?

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.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company value investors might notice is United Airlines (UAL). UAL is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 7.30 right now. For comparison, its industry sports an average P/E of 8.60. Over the past year, UAL's Forward P/E has been as high as 9.80 and as low as 6.72, with a median of 7.83.

Investors should also note that UAL holds a PEG ratio of 0.33. 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 0.46. 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 0.38.

We should also highlight that UAL has a P/B ratio of 2.18. 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. UAL's current P/B looks attractive when compared to its industry's average P/B of 2.61. 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 2.36.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. 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 0.53. This compares to its industry's average P/S of 0.62.

Finally, investors will want to recognize that UAL has a P/CF ratio of 4.69. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. UAL's P/CF compares to its industry's average P/CF of 5.09. UAL's P/CF has been as high as 6.02 and as low as 4.58, with a median of 5.24, all within the past year.

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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