ANA Holdings (TSE:9202) Looks Cheap As Its E190 E2 Order Raises A Valuation Question

ANA Holdings (TSE:9202) has moved to deepen its fleet plan by signing an agreement for eight additional Embraer E190-E2 jets, bringing its total firm orders for the type to 23.

For investors watching the tape, ANA Holdings’ share price has softened in the near term, with a 30-day share price return of 4.98% and a 7-day move that is also negative. At the same time, the 90-day share price return of 7.46% and 1-year total shareholder return of 2.81% point to momentum that has been building rather than fading over a longer stretch. This new E190-E2 order sits alongside that mixed performance and suggests recent price weakness may reflect shifting views on execution risk and capital commitment more than a clear break in the longer run story.

Scan beyond ANA Holdings and compare this fleet-driven story with a curated set of quality carriers and transport operators in the list of solid balance sheet and fundamentals (20 results).

Fleet renewal is now locked in, while the share price has slipped over the past month. Does that mix of execution risk and long term plan at ANA Holdings still skew the odds toward buyers at today’s valuation?

Price-to-Earnings of 8x: Is it justified?

On simple earnings terms ANA Holdings looks inexpensive, with a P/E of 8x that sits well below both the broader JP market on 14x and the Asian Airlines average on 14.1x.

The P/E ratio compares what investors pay for each unit of current earnings. For an airline and transport operator like ANA Holdings, that lens focuses attention on how the market is pricing its profit profile relative to peers facing similar capital intensity and cyclicality.

Here the stock trades at a marked discount. The P/E of 8x is presented as good value versus the peer average of 27.7x and is also below an estimated fair P/E of 16.4x. The SWS fair ratio model suggests this is a level the market could ultimately converge toward if sentiment and fundamentals align.

Result: Price-to-Earnings of 8x (UNDERVALUED).

Explore the SWS fair ratio for ANA Holdings.

Still, the recent 5% slide over 30 days and a three year total shareholder return that is down 4% highlight execution risk around ANA Holdings’ capital spending and demand assumptions.

Find out about the key risks to this ANA Holdings narrative.

Another View on ANA Holdings’ Valuation

The P/E argument makes ANA Holdings look cheap, yet the SWS DCF model points in the opposite direction. At ¥2,983.5 the share price sits well above an estimated future cash flow value of ¥1,000.44, which flags the stock as overvalued on that cash based lens.

That split between earnings based value and cash flow based value leaves a simple question for you as an investor: Which risk worries you more, paying up for growth that may not fully materialise, or missing a recovery if the P/E is the better guide to where this airline belongs?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out ANA Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 23 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Mixed signals around ANA Holdings can feel messy, so use that tension as a prompt to move quickly and assess the numbers for yourself. You can compare both the potential upside and the risk flags in one place by checking the 4 key rewards and 1 important warning sign.

Looking for more investment ideas beyond ANA Holdings?

Before moving on, give yourself a clear view of what else is out there. The right watchlist often starts with one smart decision.

• Target companies that look mispriced on quality and value, and let the 23 high quality undervalued stocks surface ideas that might deserve a closer look.
• Prioritise resilience and sleep-better-at-night investing by scanning the 53 resilient stocks with low risk scores for businesses with more measured risk profiles.
• Spot potential future leaders early by combing through the 74 high quality undiscovered gems before everyone else starts paying attention.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com