ASX 200 stock Qantas Airways Ltd (ASX: QAN) has been soaring high in 2024. Shares in the flying kangaroo are up 16.9% since January, climbing another 4% to $6.28 this past week.
The airline is set to post its FY24 results on 29 August, and brokers are bullish leading into the event.
Furthermore, the ASX 200 stock is priced on the low, trading at a price-to-earnings (P/E) ratio of just 6.6 times.
Let's see what the experts say about Qantas shares and whether this is a discount worth considering.
ASX 200 stock priced on the cheap
The P/E ratio measures the dollar amount investors are paying for a company's earnings per share (EPS).
Qantas shares trade at a 6.6 times P/E, meaning you pay $6.60 for every $1 of the company's earnings.
Think about that for a second – you have the opportunity to buy a dollar of earnings in one of the most iconic ASX businesses, one with a long operating history, for just $6.60.
Contrast this to the broad market, where you are paying $18.50 on the dollar.
But a low P/E ratio in itself is no gauge of a discount or not. Sometimes, companies are just lowly valued ones. This is true for any ASX 200 stock.
It depends on the fundamentals of the company and what earnings and cash flows are expected going forward.
Brokers are bullish
Goldman Sachs says Qantas is a company with solid characteristics. Despite the ASX 200 stock's rise this year, the broker sees further upside.
Goldman says the market is undervaluing Qantas' earnings growth, which — along with other initiatives –is "gaining traction, with ongoing operational performance FY24 to date."
The broker considers Qantas' valuation discount "excessive" and rates the ASX 200 stock a buy with an $8.05 price target.
This implies an upside potential of more than 28%.
UBS also rates the stock as a buy. However, with a less aggressive $7.50 per share target. It values the airline at 6.75 times P/E — slightly ahead of where it trades today.
Broker Morgans joins the list as well, slapping a $7 per share target on the airline.
Foolish takeaway
For investors seeking a strong ASX 200 stock with both growth potential and a promising dividend outlook, the brokers back Qantas as a clear choice.
