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Delta Air Lines' Margin Of Safety Is Flying As High As Its Fleet Of Planes

|About: Delta Air Lines, Inc. (DAL)
Summary

Earnings and cash flow yields are soaring.

Prices to sales and cash flow are in a value investor's sweet spot.

Market risk is above average, but it's an airline.


(Source: Delta Air Lines, Inc.)

Delta Air Lines (DAL) sports Main Street Vale Investor's (MSVI) highest margin of safety rating of all of the real-time portfolio's components as of the October 31, 2017, month-end close.

Note: MSVI month-end close and margin of safety indicator definitions are available exclusively to members of Main Street Value Investor on Marketplace.

DAL's Margin of Safety Indicators as of 10/31/2017

Actual

Target

Earnings Yield

9.97%

>5.00%

Cash Flow Yield

15.77%

>7.00%

Cash Flow Margin

15.83%

>10.00%

Return on Invested Capital

10.18%

>12.00%

Operating Earnings/Enterprise Value

13.15%

>6.00%

Price to Sales

0.89x

<2.00x

Price to Cash Flow

5.72X

<10.00x

Long-Term Debt Coverage

0.93x

>1.50x

Market Risk

Above Average

<Average

Market Consensus

Bullish

<Bullish

MSVI Overall Rating

Bullish

Bullish

(Source Main Street Value Investor)

The buy signals for DAL are evident unless an investor is leery of Delta’s return on invested capital or long-term debt coverage, which are both typical of an airline; or its market risk which is somewhat volatile for a stock with a five-year beta of 1.28. Alternatively, an investor may prefer a contrarian position to the market consensus which is bullish on DAL.

We think the bottom line for DAL is the potential as a long-term winner for investors that don’t mind buying into airlines, for better or worse. 

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Comments are strongly encouraged and always welcomed. Please read the important accompanying disclosures.

Main Street Value Investor is a trademark, and Main Street Value Investor Model Portfolio (MSVI) and Main Street 20 Watchlist are service marks of David J. Waldron.

Data Sources: Seeking Alpha, Charles Schwab & Co. (Morningstar, Thomson Reuters, and S&P Capital IQ).

Disclosure: I am/we are long DAL.

Additional disclosure: Data is for illustrative purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs or intended for portfolio construction beyond the contributor’s model portfolio which is presented solely for educational purposes. David J. Waldron is an individual investor and author, not an investment adviser. Readers should always engage in further research and consider (as appropriate) consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or qualified attorney before making any investment, income tax, or estate planning decisions.