Airlines company Ryanair is taking Wall Street by surprise today, falling to $62.78 and marking a -4.8% change compared to the S&P 500, which moved 0.0%. RYAAY is -8.68% below its average analyst target price of $68.75, which implies there is more upside for the stock.
As such, the average analyst rates it at buy. Over the last year, Ryanair shares have outstripped the S&P 500 by 35.8%, with a price change of 51.4%.
Ryanair Holdings plc, together with its subsidiaries, provides scheduled-passenger airline services in Ireland, Italy, Spain, the United Kingdom, and internationally. The company is a consumer cyclical company, whose sales and revenues correlate with periods of economic expansion and contraction. The reason behind this is that when the economy is growing, the average consumer has more money to spend on the discretionary (non necessary) products that cyclical consumer companies tend to offer. Consumer cyclical stocks may offer more growth potential than non-cyclical or defensive stocks, but at the expense of higher volatility.
Ryanair's trailing 12 month P/E ratio is 14.1, based on its trailing EPS of $4.46. The company has a forward P/E ratio of 12.0 according to its forward EPS of $3.71 -- which is an estimate of what its earnings will look like in the next quarter. The P/E ratio is the company's share price divided by its earnings per share. In other words, it represents how much investors are willing to spend for each dollar of the company's earnings (revenues minus the cost of goods sold, taxes, and overhead). As of the third quarter of 2024, the consumer discretionary sector has an average P/E ratio of 20.93, and the average for the S&P 500 is 29.3.
Another valuation metric for analyzing a stock is its Price to Book (P/B) Ratio, which consists in its share price divided by its book value per share. The book value refers to the present liquidation value of the company, as if it sold all of its assets and paid off all debts). Ryanair's P/B ratio is 9.0 -- in other words, the market value of the company exceeds its book value by a factor of more than 9, so the company's assets may be overvalued compared to the average P/B ratio of the Consumer Discretionary sector, which stands at 2.93 as of the third quarter of 2024.
Ryanair is likely fairly valued at today's prices because it has a Very low P/E ratio, a higher than Average P/B Ratio, and No published cashflows with an unknown trend. The stock has mixed growth prospects because of its decent operating margins with a stable trend, and a PEG ratio of less than 1. We hope this preliminary analysis will encourage you to do your own research into RYAAY's fundamental values -- especially their trends over the last few years, which provide the clearest picture of the company's valuation.
