With a market cap of $32.7 billion, Delta Air Lines (DAL) is the largest airline company in the United States. Disciplined capacity enhancement, cost-control measures, and a low fuel price environment have helped the airline grow its profitability over the last few years.
The EV-to-EBITDA (enterprise-to-EBITDA) ratio is considered the best ratio for comparing airline stocks (JETS). Delta Air Lines is currently trading at a discounted EV-to-EBITDA multiple compared to its top peers.
At current market prices, Delta Air Lines has an EV-to-EBITDA multiple of 5.17x, while United Continental (UAL), American Airlines (AAL), Southwest Airlines (LUV), and Spirit Airlines (SAVE) have multiples of 5.55x, 6.11x, 6.17x, and 8.76x, respectively.
In terms of Wall Street’s 12-month EBITDA expectations, Delta Air Lines is also trading at a discount to its competitors. Delta’s, American Airlines’, Southwest Airlines’, and Spirit Airlines’ forward multiples are 4.41x, 4.81x, 5.55x, and 5.04x, respectively.
The PE multiple is the simplest and most common valuation multiple. On a PE multiple basis, Delta Air Lines stock is trading at a discount to all of its peers except American Airlines. Based on the company’s trailing-12-month earnings, Delta Air Lines has a PE multiple of 9.03x. Peers American Airlines, United Continental, Southwest Airlines, and Spirit Airlines have trailing-12-month PE multiples of 7.39x, 10.16x, 12.40x, and 15.38x, respectively.
Based on Wall Street’s next-12-month earnings expectations, Delta Air Lines is also trading at a discount to all of its competitors except for American Airlines. Delta’s, United Continental’s, American Airlines’, Southwest Airlines’, and Spirit Airlines’ multiples are 7.13x, 7.65x, 5.64x, 9.83x, and 9.47x, respectively.