Lufthansa Case Study

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Lufthansa is beaten down, yet I consider it worth a shot. Lufthansa (DLAKY) is one of the largest airlines in the aviation industry and the main flag carrier of one of the strongest economies in the world: Germany. Within the country its only direct competitor is Air Berlin (AIBEF), an airline which struggles to survive at the moment. Unfortunately, Lufthansa is in a similar position. Lufthansa received a lot of hits lately, reasons such as: the crash with the Germanwing 9525 flight (a wholly owned airline subsidiary of Lufthansa), the numerous amounts of union strikes and the share price which took a few hits. As I love stocks which are beaten down and are shivering on their knees, I will explain in this article why I consider Lufthansa a…show more content…
Source: Gurufocus I looked at competitors from a worldwide perspective, such as American Airlines and Delta and more inland, such as Ryanair and Air Berlin. From a debt perspective, Lufthansa is not extraordinary different in comparison to most of its competitors, yet it shares a significant lower valuation. Air-France KLM and Air Berlin do not have a P/E as their earnings have diminished. This fundamental comparison clearly shows that Lufthansa is away from immediate pressure (such as with Air-France KLM and Air Berlin). Furthermore, the German carrier shares a low P/E with American Airlines but Lufthansa has better debt metrics in comparison to its American competitor. When I sum the overall P/E and divided by 4, the average P/E per firm is around 15. That indicates a potential rise of over 200%. Even though that might be a “best case scenario”, the median P/E of Lufthansa has been around 11.68 for the last 8 years. That leaves a potential surge of 74%. Yet in a worst case scenario, Lufthansa’s lowest P/E in the last 8 years has been 4.33 which would yield a price of $8.4. This is only 35% downwards potential and in my view a truly worst case

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