Should Value Investors Buy American Airlines (AAL) Stock?

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.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. 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.

American Airlines (AAL) is a stock many investors are watching right now. AAL is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 9.44 right now. For comparison, its industry sports an average P/E of 9.50. Over the past year, AAL's Forward P/E has been as high as 11.09 and as low as 4.04, with a median of 7.73.

Finally, investors should note that AAL has a P/CF ratio of 2.92. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 6.53. Over the past 52 weeks, AAL's P/CF has been as high as 4.58 and as low as 2.04, with a median of 3.05.

Investors could also keep in mind SkyWest (SKYW), another Transportation - Airline stock with a Zacks Rank of #2 (Buy) and Value grade of A.

SkyWest is trading at a forward earnings multiple of 10.04 at the moment, with a PEG ratio of 0.99. This compares to its industry's average P/E of 9.50 and average PEG ratio of 0.49.

SKYW's Forward P/E has been as high as 14.41 and as low as 8.62, with a median of 11.24. During the same time period, its PEG ratio has been as high as 1.35, as low as 0.98, with a median of 1.15.

Additionally, SkyWest has a P/B ratio of 1.63 while its industry's price-to-book ratio sits at 3.15. For SKYW, this valuation metric has been as high as 2.02, as low as 1.30, with a median of 1.69 over the past year.

Value investors will likely look at more than just these metrics, but the above data helps show that American Airlines and SkyWest are likely undervalued currently. And when considering the strength of its earnings outlook, AAL and SKYW sticks out as one of the market's strongest value stocks.

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This article originally published on Zacks Investment Research (zacks.com).

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