Spirit AeroSystems (SPR): Evaluating Valuation Following Major Customer Talks, Delivery Delays, and Management Probe
Spirit AeroSystems Holdings (SPR) is in the spotlight after three significant developments: its request for financial relief from Boeing and Airbus, a supplier-related slowdown in Boeing deliveries, and an investigation into its management’s conduct.
See our latest analysis for Spirit AeroSystems Holdings.
This flurry of news comes after a solid run for Spirit AeroSystems. While the share price dipped 4.1% on the latest trading day, its year-to-date gain sits at 15.2%. Momentum has cooled in recent weeks, but the bigger picture remains positive, with a 25% total shareholder return over the past year pointing to investor optimism about turnaround potential despite recent headwinds.
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With shares still up sharply over the past year, the key question now is whether Spirit AeroSystems is trading below its true value after recent turbulence, or if the market has already factored in any future rebound potential.
Spirit AeroSystems is currently trading at a price-to-sales ratio of 0.7x, with its shares last closing at $38.65. This multiple puts SPR well below the peer group and sector averages, signaling that the market is assigning a much lower value to its revenues compared to competitors.
The price-to-sales ratio is a useful tool for valuing companies that are unprofitable, especially in capital-intensive sectors like aerospace and defense. It compares a company’s market capitalization to its annual sales, giving investors perspective on how much the market is willing to pay for each dollar of revenue.
At 0.7x, Spirit AeroSystems is valued dramatically lower than both the U.S. Aerospace & Defense industry average of 3.5x and the peer average of 13.2x. However, our estimates suggest a fair price-to-sales ratio of 0.4x. This implies that even at this discount, shares could still be more expensive than justified by fundamentals. If the market re-rates to the fair ratio, there could be further downside.
Explore the SWS fair ratio for Spirit AeroSystems Holdings
Result: Price-to-Sales of 0.7x (UNDERVALUED against peers, but EXPENSIVE relative to fair ratio)
However, slowing revenue growth and ongoing net losses could challenge the case for a rebound if operational headwinds persist for a longer period than expected.
Find out about the key risks to this Spirit AeroSystems Holdings narrative.
While the price-to-sales ratio suggests Spirit AeroSystems is trading at a discount to its peers, our DCF model presents a dramatically different perspective. According to this discounted cash flow analysis, shares are trading well below the estimated fair value of $216.34, indicating they could be deeply undervalued based on projected cash flows.
