US Airways Group, Inc. (LCC): Buy This Airline Stock After Delta Air Lines, Inc. (DAL) Leads Sector Sell-Off

Valuation

As shown by the chart below, despite the optimism surrounding the industry, airlines continue to trade at depressed valuations. Because of this, I believe airline stocks will continue to move higher even with less than great results. In particular, US Airways seems the most undervalued based on PE ratios.

LCC Forward PE Ratio data by YCharts

Conclusion

Investors and traders alike should use Tuesday’s decline as an opportunity to buy airline shares. The major trends behind the rally have not changed. Yes, Delta’s results were disappointing, but the stock trades at just 5.6 times forward earnings. More important than operating results is the theme that airline profits might, for the first time in recent history, be sustainable. If airlines are able to prove that the long-term fortunes for the industry have indeed changed then shares are a bargain at current levels despite weaker than expected results. My favorite way to play the sector is US Airways as I expect the stock to perform well as its merger with AMR closes.

The article Buy This Airline Stock After Delta Leads Sector Sell-Off originally appeared on Fool.com and is written by Sammy Pollack.

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