European carrier Ryanair Holdings RYAAY looks highly unattractive from a valuation standpoint. Considering the forward 12-month price-to-sales ratio (P/S-F12M), RYAAY has a forward 12-month P/S-F12M of 1.56X compared with 1.16X for the industry.
RYAAY P/S Ratio (Forward 12 Months) Vs. Industry
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RYAAY has a Value Score of C.
Now, the question is whether it is worth buying, holding, or selling the RYAAY stock at current prices. Let us delve deeper to find out.
Risks Weighing on RYAAY Stock
Production delays at Boeing have been hurting the fleet-related plans of most airline companies, and it is no different for RYAAY. RYAAY is actively in talks with Boeing leadership to speed up aircraft deliveries and has also visited Seattle at the beginning of January. Although B737 production is recovering from Boeing’s strike in late 2024, it is still slow to deliver sufficient aircraft ahead of the summer season of fiscal 2025.
RYAAY anticipates nine deliveries before the summer season of fiscal 2025, while the remaining 29 Gamechangers of the 210 orderbook are likely to be delivered before March 2026. Additionally, Boeing expects the MAX-10 to be certified in late 2025, followed by the delivery of the first 15 MAX-10s in Spring 2027. Given that the risk of delivery delays remains high, Ryanair initially lowered its fiscal 2026 traffic target from 215 million passengers to 210 million passengers, and now this has been reduced to 206 million passengers.
Escalating operating expenses due to high staff costs and higher air traffic control fees are hurting Ryanair’s bottom line. During the first nine months of fiscal 2025, staff costs increased 18% year over year, primarily due to the larger fleet and Boeing delivery delays, which resulted in higher crewing ratios and the annualization of crew productivity pay increases.
Airport and handling charges rose 13% year over year owing to traffic growth, higher landing, ground air traffic control and handling rates. As a result, total operating expenses rose 8% year over year during the first nine months of fiscal 2025. High costs naturally put pressure on margins.
RYAAY’s Price Performance
Shares of RYAAY have not had a good time on the bourses of late, declining in double-digits over the past year. The disappointing price performance resulted in RYAAY underperforming the Zacks Airline industry in the said time frame. Additionally, RYAAY’s price performance compares unfavorably with that of other airline operators, such as Alaska Air Group, Inc. (ALK) and Allegiant Travel Company (ALGT), in the same timeframe.
RYAAY Stock One-Year Price Comparison
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Tailwinds Working in Favor of RYAAY Stock
Despite facing multiple Boeing delivery delays, RYAAY's traffic grew 9% year over year during the first nine months of fiscal 2025. Given this backdrop, Ryanair expects its fiscal 2025 traffic to reach almost 200 million (+9%) passengers, subject to no further adverse news on Boeing delivery delays. This marks an improvement from the prior view of reaching 198-200 million passengers (+8%).
Ryanair’s fleet-modernization initiatives to cater to the travel demand look encouraging. The inclusion of modern planes in its fleet and the retirement of the old ones aligns with its environmental-friendly approach. The new inclusions, apart from having all basic amenities, result in improved fuel efficiency. Ryanair expects these fuel-efficient MAX jets to generate substantial growth.
RYAAY has a solid balance sheet. The low-cost carrier ended third-quarter fiscal 2025 with cash and cash equivalents of $3.31 billion, much higher than the current debt level of $905 million. This implies that the company has sufficient cash to meet its current debt obligations. Meanwhile, the long-term debt level has decreased to $1.79 billion at the end of third-quarter fiscal 2025 from $2.72 billion at third-quarter fiscal 2024-end. RYAAY's efforts to repay its debts are encouraging too.
Concurrent with the earnings announcement for the third quarter of fiscal 2025 (ended Dec. 31, 2024), RYAAY announced it is gearing up to repay a maturing €850 million bond in September 2025 from internal cash resources.
Long-Term Debt to Capitalization
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A strong balance sheet enables the company to reward shareholders with dividends and share repurchases. Concurrent with RYAAY’s earnings announcement for the third quarter of fiscal 2025 (ended Dec. 31, 2024), RYAAY announced that it has completed more than 50% of its current €800m buyback program and is on track to complete this program by mid-2025. On completion, Ryanair will have returned almost €9 billion (including dividends) to shareholders since 2008, with approximately 36% of the issued share capital repurchased and canceled.
How Should Investors Approach RYAAY Stock?
It is understood that RYAAY stock is currently unattractively valued. Moreover, production delays at Boeing have been hurting the fleet-related plans of the company. Escalating operating expenses due to high staff costs and higher air traffic control fees are weighing on the bottom line.
Despite the headwinds, we advise investors not to sell RYAAY stock now, given its solid balance sheet, which increases the company’s financial flexibility. RYAAY’s measures to expand its fleet, to cater to the rising travel demand, also look encouraging. We advise investors to wait for a better entry point. For those who already own the stock, it will be prudent to stay invested. The company’s current Zacks Rank #3 (Hold) justifies our analysis.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Ryanair Holdings PLC (RYAAY): Free Stock Analysis Report Alaska Air Group, Inc. (ALK): Free Stock Analysis Report Allegiant Travel Company (ALGT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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