Take Care Before Jumping Onto Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) Even Though It's 27% Cheaper

Unfortunately for some shareholders, the Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) share price has dived 27% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 32% in that time.

Although its price has dipped substantially, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 17x, you may still consider Sun Country Airlines Holdings as an attractive investment with its 9.4x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Our free stock report includes 2 warning signs investors should be aware of before investing in Sun Country Airlines Holdings. Read for free now.

Sun Country Airlines Holdings hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for Sun Country Airlines Holdings

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How Is Sun Country Airlines Holdings' Growth Trending?

There's an inherent assumption that a company should underperform the market for P/E ratios like Sun Country Airlines Holdings' to be considered reasonable.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 23%. This means it has also seen a slide in earnings over the longer-term as EPS is down 32% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 40% per year during the coming three years according to the six analysts following the company. With the market only predicted to deliver 10% each year, the company is positioned for a stronger earnings result.

In light of this, it's peculiar that Sun Country Airlines Holdings' P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

The softening of Sun Country Airlines Holdings' shares means its P/E is now sitting at a pretty low level. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Sun Country Airlines Holdings currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Sun Country Airlines Holdings that you need to be mindful of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.