As of July 20, 2023, United Airlines Holdings Inc (UAL, Financial) has seen a gain of 3.23% in its stock price, bringing it to $56.57 per share. This major U.S. network carrier, with a market cap of $18.6 billion and sales totalling $48.8 billion, is showing signs of being modestly undervalued according to the GuruFocus valuation method. The GF Value, a unique indicator of a stock's intrinsic worth, places the fair value of United Airlines Holdings at $71.29.
Operating a hub-and-spoke system primarily focused on international and long-haul travel, United Airlines Holdings has hubs in major cities including San Francisco, Chicago, Houston, Denver, Los Angeles, New York/Newark, and Washington, D.C. Despite the complexities of the transportation industry, the company has managed to maintain an operating margin of 7.85% and an earnings per share of $5.82.
GF Value: A Closer Look
The GF Value of United Airlines Holdings is based on historical trading multiples, an adjustment factor from GuruFocus, and future business performance estimates. If the stock price is significantly above the GF Value Line, it may be overvalued. Conversely, if it's significantly below, it could be undervalued. Currently, United Airlines Holdings' stock price suggests modest undervaluation.
Given this valuation, the long-term return of United Airlines Holdings' stock is likely to be higher than its business growth. This presents a potentially attractive opportunity for value investors.
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Financial Strength and Profitability
Investing in companies with poor financial strength can lead to permanent capital loss. Therefore, understanding a company's financial strength is crucial. United Airlines Holdings' cash-to-debt ratio stands at 0.48, better than 50.21% of companies in the Transportation industry. Despite this, its overall financial strength is ranked at 4 out of 10 by GuruFocus, indicating room for improvement.
Profitability is another essential factor for investors. United Airlines Holdings has been profitable 8 out of the past 10 years, with an operating margin that ranks better than 51.18% of companies in its industry. Its profitability is ranked at 6 out of 10 by GuruFocus.
Growth and Return on Invested Capital
Growth is closely correlated with long-term stock performance. Unfortunately, United Airlines Holdings' 3-year average annual revenue growth rate is -6.5%, ranking worse than 75.17% of companies in the Transportation industry. Its 3-year average EBITDA growth rate is -16.2%, ranking worse than 85.05% of companies in its industry.
Comparing the company's return on invested capital (ROIC) with its weighted average cost of capital (WACC) can provide further insights into profitability. Over the past 12 months, United Airlines Holdings' ROIC was 4.64, lower than its WACC of 5.93.
Conclusion
In conclusion, United Airlines Holdings Inc (UAL, Financial) shows signs of being modestly undervalued. While its financial condition is poor and its growth lags behind most companies in the Transportation industry, its profitability is fair. For more information about United Airlines Holdings stock, check out its 30-Year Financials here.
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