International Consolidated Airlines Group (IAG), the parent company of British Airways, Aer Lingus, and Vueling, has demonstrated remarkable growth since early 2022. As of January 19, 2024, shares of IAG have surged by 182.1%. This impressive rise positions IAG as the eighth-best performer in the FTSE 100 over the past two years.
The Value of a £10,000 Investment
Investors who placed a £10,000 investment in IAG two years ago would witness their stake ballooning to approximately £19,040 today. This growth is further complemented by the reinstatement of dividends during this period.
Current Market Valuation
IAG shares currently trade at a price-to-earnings ratio of around eight times their annual earnings. This valuation appears significantly low, especially when compared to industry rivals such as easyJet, which operates at a similar ratio.
Investors’ Concerns
The lingering effects of the COVID-19 pandemic may be influencing current investor sentiment. Many are wary of international travel’s inherent risks, including potential pandemics or geopolitical tensions. These factors might contribute to the low P/E ratio observed in the sector.
Future Outlook for IAG
Looking ahead, forecasts indicate promising growth for IAG. Analysts anticipate an increase in both revenue and earnings over the forthcoming years. Moreover, shareholders can expect stable dividends, with a yield of 2.32%, albeit considered low compared to other FTSE 100 companies.
Analyst Recommendations
- Out of 17 analysts tracking IAG, only one recommends selling the stock.
- The consensus price target suggests a potential price increase of 17.8% over the next 12 months.
- One particularly optimistic analyst predicts a share price increase of up to 65% within the same timeframe.
While a repeat of the remarkable growth seen over the last two years may be unrealistic, analysts suggest that IAG holds substantial value for investors willing to accept associated risks. As the market evolves, opportunity remains abundant for those who are perceptive to the shifts in the airline industry.
