As of July 20, 2023, United Airlines Holdings Inc (UAL, Financial) saw a gain of 3.23%, with its stock price standing at $56.57. The company, boasting a market cap of $18.6 billion, has reported earnings per share of $5.82, and sales reaching $48.8 billion. According to the GuruFocus valuation, the GF Value of United Airlines Holdings is estimated at $71.29, indicating that the stock is modestly undervalued.
United Airlines Holdings Inc is a significant U.S. network carrier, operating a hub-and-spoke system primarily focused on international and long-haul travel. With hubs in San Francisco, Chicago, Houston, Denver, Los Angeles, New York/Newark, and Washington, D.C., the company has established a robust presence in the aviation industry.
GF Value: A Deep Dive
The GF Value of United Airlines Holdings, derived from historical trading multiples, GuruFocus' adjustment factor based on past performance and growth, and estimates of future business performance, suggests that the stock is modestly undervalued. The GF Value Line, representing the fair value at which the stock should ideally be traded, indicates that at its current price of $56.57 per share, United Airlines Holdings offers potential for high future returns.
Given that United Airlines Holdings is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength: A Critical Concern
Investing in companies with poor financial strength can pose a high risk of permanent capital loss. To avoid this, investors must review a company’s financial strength before purchasing shares. United Airlines Holdings has a cash-to-debt ratio of 0.48, ranking better than 50.21% of companies in the Transportation industry. However, the overall financial strength of United Airlines Holdings is 4 out of 10, indicating poor financial strength.
Profitability: A Safer Investment?
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. United Airlines Holdings, with a revenue of $48.8 billion and earnings per share of $5.82 over the past twelve months, has been profitable 8 out of the past 10 years. Its operating margin is 7.85%, ranking better than 51.18% of companies in the Transportation industry. Overall, the profitability of United Airlines Holdings is ranked 6 out of 10, indicating fair profitability.
Growth: A Key Factor in Valuation
Growth is a crucial factor in a company's valuation. A faster-growing company creates more value for shareholders, especially if the growth is profitable. However, the 3-year average annual revenue growth of United Airlines Holdings 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 the same industry.
ROIC vs. WACC: A Profitability Indicator
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can help determine its profitability. For the past 12 months, United Airlines Holdings’s ROIC is 4.64, and its WACC is 5.93, implying that the company is not creating value for shareholders.
Conclusion
Overall, United Airlines Holdings (UAL, Financial) stock appears to be modestly undervalued. Despite the poor financial condition, its profitability is fair. However, its growth ranks worse than 85.05% of companies in the Transportation industry. To learn more about United Airlines Holdings stock, you can check out its 30-Year Financials here.
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