Is there now an opportunity in Allegiant Travel Company (NASDAQ:ALGT)?

Allegiant Travel Company (NASDAQ:ALGT), isn’t the biggest company in the market, but it has seen some major price moves in recent months on the NASDAQGS, hitting highs of US$151 and falling to lows. trough of US$102. Certain movements in the stock price can give investors a better opportunity to get into the stock and potentially buy at a lower price. One question to answer is does Allegiant Travel’s current price of $102 reflect the true value of small caps? Or is it currently undervalued, giving us the opportunity to buy? Let’s take a look at Allegiant Travel’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Allegiant Travel

What is the Allegiant Travel Opportunity?

Allegiant Travel is currently expensive based on my multiple pricing model, where I look at the company’s price/earnings ratio against the industry average. In this case, I used the Price/Earnings (PE) ratio since there is not enough information to reliably predict the stock’s cash flow. I find Allegiant Travel’s ratio of 40.39x to be above its average of 22.39x, suggesting the stock is trading at a higher price relative to the airline industry. If you like the action, you might want to keep an eye out for a potential price drop going forward. Since the Allegiant Travel stock price is quite volatile, this could mean that it may go down (or up even more) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator of how the stock is doing relative to the rest of the market.

Can we expect growth from Allegiant Travel?

NasdaqGS: ALGT Earnings and Revenue Growth August 22, 2022

Investors looking for portfolio growth may want to consider a company’s prospects before buying its stock. Although value investors argue that it is intrinsic value relative to price that matters most, a more compelling investment thesis would be high growth potential at a cheap price. Allegiant Travel’s revenues over the next few years are expected to double, indicating a very optimistic future. This should lead to higher cash flow, fueling higher share value.

What this means for you

Are you a shareholder? It looks like the market has well and truly priced in the positive outlook for ALGT, with stocks trading above industry price multiples. At this current price, shareholders may ask a different question: should I sell? If you think ALGT should be trading below its current price, selling at a high price and buying it back when its price falls towards the industry PE ratio can be profitable. But before making this decision, see if its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ALGT for a while, now might not be the best time to get into the stock. The price has outpaced its industry peers, which means there are likely to be no more benefits from poor pricing. However, the optimistic outlook is encouraging for ALGT, which means that it is worth digging into other factors in order to take advantage of the next price drop.

If you want to dig deeper into Allegiant Travel, you should also look at the risks it currently faces. Our analysis shows 4 warning signs for Allegiant Travel (1 is a little nasty!) and we strongly recommend that you consult them before investing.

If you are no longer interested in Allegiant Travel, you can use our free platform to view our list of over 50 other stocks with high growth potential.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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