Shares in Worldwide Airways Group (LSE: IAG) are up 110% prior to now 12 months. That makes the group, which is mum or dad to main airways corresponding to British Airways, Iberia, and Vueling, top-of-the-line performing UK shares.

An funding of £10,000 can be value £21,168, with dividends included. That’s nice information for buyers who purchased the shares a 12 months in the past however what does that imply for newcomers? Is there nonetheless worth within the inventory?

To guage the place the inventory could be headed, it’s value wanting into its current earnings and checking valuation metrics.

Current blue-sky earnings

IAG’s set to launch its ultimate outcomes later this week with a big influence on its share price going ahead. In its Q3 outcomes, income got here in at €9.33bn, a 7.9% enhance 12 months on 12 months, and working revenue hit €2.02bn, up 15.4% from the earlier 12 months.

The working margin additionally improved to 21.6%, a 1.4% enhance. The corporate additionally introduced a €350m share buyback, reflecting robust efficiency and a dedication to shareholders.

Valuation metrics

When evaluating IAG as a possible funding, it’s value contemplating the next key metrics. IAG’s present price-to-earnings (P/E) ratio is roughly 4.1, under the peer common of 12, so there might be extra development potential within the inventory.

Its price-to-sales (P/S) ratio and price-to-book (P/B) ratios are equally low at solely 0.6 and 0.8 respectively, suggesting the present share price is considerably undervalued.

Nevertheless, prior to now two weeks, the price has declined by over 10%. This might be a minor pullback however may be the beginning of a significant price correction. It may be proof of weakening investor confidence if shareholders anticipate underwhelming This fall outcomes.

Analysts anticipate a 15% enhance in annual earnings when the outcomes come out however the potential influence from gasoline prices stay a vital concern. Which brings us to the dangers the corporate faces.

Debt and disruption

To fulfill the problem of rising gasoline prices, IAG’s been investing in gasoline environment friendly plane and optimising routes. This has proven some early indicators of profitability however many different dangers stay.

Because the pandemic proved, the airline business is extremely inclined to journey disruptions. These happen in lots of kinds, corresponding to strikes, surprising upkeep prices and the influence of geopolitical points on journey demand.

As well as, it faces powerful competitors from price range airways like easyJet and Ryanair, each of which have grow to be more and more standard in recent times.

Managing these dangers whereas decreasing Covid-era debt is vital. In H1 of 2024, the corporate’s web debt stood at £13.66bn, down from £17bn in 2022. That’s virtually double its money and money equivalents.

Lengthy-term considering

I’m aggravated I didn’t buy IAG shares final 12 months as they might have been fairly worthwhile. I mulled it over however ultimately selected to pursue different choices.

But the hesitations that held me again then stay. The dangers associated to gasoline prices and journey disruption are important sufficient that I really feel they outweigh the potential long-term advantages.

Mixed with the now larger price, it’s not a inventory I’ll think about except outcomes this Friday beat expectations significantly.