Originally Posted by
winner69
Roger, I hear what you are saying about AIR doing to PE expansion and reverting to its long term average of 10.
However I point out that generally when AIR has an PE >10 is when profits are down the gurgler - like 2010/2012 period as per numbers below (from Morningstar)
Interesting their is a pretty strong correlation between AIR's EPS and the relativity of AIR's PE to the market (discount) - that correlation being >60%
In other words (historically) the more money AIR makes the more AIR's PE is 'discounted' by the market (and vice versa). Even the current 'discount' of 75% (AIR's PE relative to market's PE) isn't an outlier in the scheme of things
You are correct that as AIR's earnings fall the PE will probably increase - but unless they wipe out completely I would say that a reasonable PE will settle at between 6 and 8 (based on history) - a lot also depends on how well the NZX does or doesn't as well
We probably saying the same thing - you with some rnthusiasm but I am a bit more tempered in my expectations.
Main factor is that AIR is a real cyclical and to make matters worse a NZ cyclical so has that additional 'discount' to Aussie and global airlines. It really is a beast that defies logic