Is Qantas a bargain ASX 200 stock today?

Analysts at Goldman Sachs think the Flying Kangaroo could be dirt cheap.

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With the ASX 200 index likely to hit a record high on Thursday, you would be forgiven to think that there are no bargain ASX 200 stocks currently trading on the bourse.

However, that may not be the case according to analysts at Goldman Sachs.

The broker has identified one ASX 200 stock that could be well and truly in the bargain bin right now and have major upside potential.

That stock is Australia's flag carrier airline Qantas Airways Limited (ASX: QAN).

Is Qantas a bargain ASX 200 stock?

As with most airlines, Qantas had an incredibly tough time during the pandemic.

But it certainly didn't waste the crisis. It worked hard to cut costs materially and make its operations leaner and more profitable.

So much so, the company was able to deliver a huge profit in FY 2023 and then followed this up with another bumper profit during the first half of FY 2024.

However, despite this structurally improved profitability, Qantas shares are still trading on a lower valuation than pre-COVID times.

This hasn't gone unnoticed by analysts at Goldman Sachs, who believe the market is seriously undervaluing this ASX 200 stock, potentially making it a real bargain at current levels. The broker recently commented:

Notwithstanding a decline in unit revenues (and group capacity still at 95% of pre-COVID) our estimated FY24e EPS sits 52% above pre-COVID levels. Despite this, QAN's market capitalisation and EV is 17% and 24% lower than pre-COVID levels. We acknowledge broader macro uncertainty at this point in the cycle, but believe the current share price does not reflect the group's improved earnings capacity.

Big returns to come?

Goldman currently has a buy rating and $8.05 price target on Qantas shares.

Based on its current share price of $5.41, this implies potential upside of almost 50% for investors.

The broker concludes:

[W]e believe QAN is not priced for a generic recovery, let alone prospects for improved earnings capacity. We continue to see upside associated with substantially improved MT earnings capacity.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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