ASX bargain stock Qantas Airways Ltd (ASX: QAN) has been on the move, jumping into the green over the past month of trade.
Shares in the international airline now trade at $6.79 per share, more than 11% higher over the previous month.
Yet, the stock still trades at a price-to-earnings ratio (P/E) of 9 times, around half that of the broad market.
Despite the recent surge, some analysts still see this ASX giant as an undervalued opportunity. Let's take a look.
Is Qantas an ASX bargain share?
Even after its recent rally, Qantas shares are trading at a P/E ratio of just 9 times. In other words, investors are paying $9 for every $1 of the ASX bargain stock's profits.
In comparison, buying a dollar of earnings from the broader S&P/ASX ASX 200 Index (ASX: XJO) would cost you almost two times as much.
The question is, what do you get for such a discount?
For one, Qantas has benefited from the industry shakeup, where Regional Express Holdings Ltd (ASX: REX) recently entered voluntary administration.
Reduced competition in the domestic market could mean Qantas has an opportunity to capture more market share in Australia.
Secondly, the company is set to restart dividends from H2 FY25, along with a $400 million stock buyback announced in its annual results.
This came after sales increased 10% year over year to nearly $22 billion, with Jetstar leading the way.
It wasn't all sunshine though. Pre-tax earnings were down 16% year over year, driven by a similar decline in Qantas domestic profits and a 39% drop from international.
The ASX bargain stock has lifted in the days following the announcement.
Is Qantas a buy?
Despite the recent uptick, many brokers remain bullish on Qantas.
UBS, for example, rates the stock a buy with a $7.50 price target, citing Qantas' improved post-pandemic position.
The broker believes that the company has strengthened its balance sheet, reduced competition, and boosted earnings from its loyalty division.
Goldman Sachs is even more optimistic. The broker has placed a price target of $8.05 on Qantas shares, representing a potential upside of 18.5%.
It argues the market isn't fully valuing Qantas' improved operational performance since the COVID-19 pandemic. According to Goldman, Qantas' earnings are stronger, and it sees "upside associated with substantially improved MT earnings capacity".
Meanwhile, Morgans also rates Qantas as a buy, with a slightly lower price target of $7 apiece.
Foolish takeaway
With multiple brokers rating Qantas shares as a buy, the airline appears to be well-positioned for further growth.
In the last 12 months, the stock has lifted 19%, with the P/E ratio increasing from 6 times to 9 times.
