Is American Airlines Stock Attractive After a 15.6% Surge on Travel Demand News?

Ever wondered if American Airlines Group stock is really offering value or if you're about to overpay? Let's break it down together with a fresh look at what the numbers and market sentiment actually mean. The share price has moved up 4.0% over the past week and a solid 15.6% in the last month. However, it is still down 19.7% year-to-date, hinting at both renewed optimism and lingering skepticism among investors. Lately, headlines around travel demand rebounding and changes in airline routes have been driving interest in airline stocks. American Airlines has drawn attention for its operational adjustments and responses to shifting consumer preferences. This news may be influencing short-term price moves, but it also raises important questions about long-term fundamentals. On the valuation front, American Airlines comes in at a score of 4 out of 6, indicating it passes most of our value checks. We will walk through what that means using a range of traditional valuation approaches, and touch on a smarter way to get perspective at the end for the bigger picture.

Find out why American Airlines Group's -1.2% return over the last year is lagging behind its peers.

Approach 1: American Airlines Group Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's true worth by projecting future cash flows and discounting them back to today's value. This approach gives investors a clearer perspective on what the business may be worth, based on its ability to generate cash in the years ahead.

For American Airlines Group, the DCF uses a 2 Stage Free Cash Flow to Equity model. The company's latest twelve months free cash flow sits at $1.03 billion. Analysts provide cash flow estimates through 2028, projecting it will rise to $1.14 billion by then, with longer-term projections rising further each year. After 2028, additional estimates are calculated by extrapolating growth rates based on industry and company trends.

Based on these projections and discounting all those future cash flows back to today, the model arrives at an intrinsic value of $23.15 per share. Compared to the current share price, the DCF suggests the stock is trading at a 41.0% discount, which signals that shares are significantly undervalued at present.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests American Airlines Group is undervalued by 41.0%. Track this in your watchlist or portfolio, or discover 870 more undervalued stocks based on cash flows.AAL Discounted Cash Flow as at Nov 2025

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for American Airlines Group.

Story Continues

Approach 2: American Airlines Group Price vs Earnings (PE)

When it comes to valuing profitable companies, the Price-to-Earnings (PE) ratio is a go-to gauge for investors. This metric helps translate a company’s profit into something you can compare, either to similar businesses, the broader industry, or historical levels. Because it captures how much investors are willing to pay for each dollar of earnings, the PE ratio is especially useful for companies like American Airlines Group that are generating consistent profits.

But what is a "normal" or "fair" PE ratio? Generally, companies with higher expected growth or lower perceived risk command higher multiples, while slower growers or riskier firms trade for less. This means that context is important, as industry trends and the earnings outlook can shift what investors view as reasonable.

Currently, American Airlines Group has a PE ratio of 15.0x. The industry average for airlines is lower at 8.7x, and its closest peers are at an average of 23.6x, illustrating a spread in how the market values different airlines. To move beyond simple averages, Simply Wall St’s proprietary "Fair Ratio" offers a deeper benchmark. For American Airlines Group, the Fair Ratio is calculated at 22.9x, which factors in the company’s earnings growth prospects, profit margins, industry specifics, market cap, and unique risk profile.

Comparing a company's PE directly to its Fair Ratio gives a much more tailored sense of value than just eyeing peers or industry averages. The Fair Ratio adapts to the company’s exact business context instead of relying on broad, sometimes misleading, comparisons. In the case of American Airlines Group, the current PE of 15.0x sits well below its Fair Ratio of 22.9x, suggesting the market isn’t fully acknowledging the company’s earning potential relative to its unique characteristics.

Result: UNDERVALUEDNasdaqGS:AAL PE Ratio as at Nov 2025

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1401 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your American Airlines Group Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. Narratives are your personal investment story, connecting your own assumptions about American Airlines Group, such as forecasts for revenues, profit margins, and risks, to a transparent fair value estimate. Instead of relying solely on traditional measures, Narratives let you translate your view of the company's future into numbers, linking the story behind the headline to a real, actionable valuation.

With Narratives, you can easily see how changes in forecasts or market events shift your view of fair value, all within the Community page on Simply Wall St's platform used by millions of investors. This tool simplifies decision-making by showing if the current share price looks attractive relative to your Narrative fair value, helping you decide when to buy or sell based on your own perspective rather than just consensus. Narratives are automatically updated whenever new financial results or news emerge, so your analysis always stays relevant.

For American Airlines Group, one investor might focus on debt risks and assign a fair value as low as $10.61, while another emphasizes loyalty growth and margin recovery, arriving at $15.02. This shows how powerful and adaptable this approach is to each user’s outlook.

For American Airlines Group, we’ll make it really easy for you with previews of two leading American Airlines Group Narratives:

🐂 American Airlines Group Bull Case

Fair Value: $15.02

Currently undervalued by approximately 8.4%

Expected Revenue Growth: 4.90%

Analyst consensus sees improving domestic demand, premium service upgrades, and loyalty expansion fueling revenue and margin growth over the next three years. Despite ongoing cost pressures and high debt, investments in newer aircraft and global alliances support long-term profitability and customer retention. Analysts forecast fair value near the current share price, suggesting the stock is fairly priced if future estimates on earnings and revenue are achieved.

🐻 American Airlines Group Bear Case

Fair Value: $10.61

Currently overvalued by approximately 28.7%

Expected Revenue Growth: 2.5%

American's heavy debt load and negative equity make it the riskiest U.S. legacy carrier, leaving it sensitive to any economic or industry downturn. With travel demand under pressure and fierce competition, the company faces margin erosion and an uncertain outlook compared to stronger peers. Recovery depends on successful execution of premium economy expansion and continued favorable refinancing conditions, both of which could be challenged in a less optimistic environment.

Do you think there's more to the story for American Airlines Group? Head over to our Community to see what others are saying!NasdaqGS:AAL Community Fair Values as at Nov 2025

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.

Companies discussed in this article include AAL.

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