Does UAL Stock's Lower Valuation Present a Smart Buying Opportunity?

United Airlines UAL, a Chicago-based airline heavyweight, looks highly attractive from a valuation standpoint. With a forward price-to-sales (P/S) ratio of 0.51, UAL stock trades at a significant discount to industry levels, the S&P 500, and rival Delta Air Lines DAL. UAL’s P/S F12M Vs. Industry, S&P 500 & DALImage Source: Zacks Investment ResearchUAL has a Value Score of A.Now, the question is whether it is worth buying the stock at current prices. Let us delve deeper to find out.UAL Stock Likely to Fly High Throughout 2025The stronger-than-expected recovery in air travel demand following the pandemic has been supporting the growth of airline stocks like United Airlines. While air travel demand is particularly strong on the leisure front, it is heartening to note that business demand has made an impressive comeback.UAL's strategic focus on international markets and retention of aircraft and pilots during COVID-19 have driven its rapid growth. The company’s strong focus on international markets has paid rich dividends as few foreign airlines were able to return capacity to the market as quickly as UAL did. United Airlines had a busy summer in 2024, carrying a record 48 million passengers. It saw a travel surge in winter as well, led by increased travel to Europe. This indicates that Americans are more inclined to spend their money during holidays on experiences instead of physical gifts. To cater to the surge in holiday demand, UAL offered nearly 60 nonstop flights each day from its hubs in the United States to Europe in November and December.With air travel demand expected to remain healthy, UAL stock should continue to perform well. UAL’s expansion strategy, coupled with its focus on premium demand, serves it well and positions it to capture a larger slice of the recovering travel market. The sharp reduction in airline seats in the domestic market, which has driven up ticket prices, is serving UAL well.  As a result, analysts have seemingly turned optimistic about the stock and upwardly revised earnings estimates over the past month.Image Source: Zacks Investment ResearchUAL’s Strong Price PerformanceMainly driven by upbeat air travel demand, shares of UAL have performed well in the past year. Shares have outperformed the Zacks Transportation - Airline industry, fellow industry player American Airlines AAL and the S&P 500 Index over the same timeframe.One-Year Price ComparisonImage Source: Zacks Investment ResearchUAL’s Liquidity & Buyback Program Lift ConfidenceUAL’s balance sheet further underscores its strength. With $17.4 billion in total liquidity as of Dec. 31, 2024, including $14.7 billion in cash, the company is well-equipped to weather macroeconomic challenges.Investor-friendly initiatives add another layer of appeal. In October, UAL announced a $1.5 billion share buyback plan, highlighting its pro-shareholder approach. This was the company's first buyback program since suspending share repurchases during the COVID-19 pandemic. More than $1.4 billion remained in authorization as of Dec. 31, 2024.Should You Buy UAL Stock Now?High labor costs (expenses on salaries and related costs were up 12.8% in 2024) and a very large but aging fleet raise concerns. Delivery delays, predominantly of the 737MAX, due to production issues at Boeing BA hampered UAL’s fleet-related plans. For 2025, UAL expects to receive approximately 40 Boeing 737MAX jets. It also expects to receive other jets to modernize its fleet. This will require substantial capex (expected to be less than $7 billion in 2025).We believe UAL is well-positioned to dodge the challenges.  Upbeat air travel demand and shareholder-friendly initiatives are supporting growth. UAL’s valuation adds to the layer of positives. Donald Trump's re-election is a positive for the airline industry and expected to lead to a return to the pro-business stance that characterized his first term.  The Wall Street average target price of $134.53 for UAL stock suggests an upside of more than 37% from current levelsWith a mix of value, growth potential and resilience, UAL stock is a compelling addition to any portfolio. The stock sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Boeing Company (BA): Free Stock Analysis Report Delta Air Lines, Inc. (DAL): Free Stock Analysis Report United Airlines Holdings Inc (UAL): Free Stock Analysis Report American Airlines Group Inc. (AAL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks