The best alternatives to consider as the IAG share price climbs!

THE IAG (LSE:IAG)’s share price has given back some of its gains from recent weeks, but it continues to perform well. The stock is up 35% over two years, which places it among the FTSE100the most efficient.

So, is it time to start looking for more attractive investments in the airline sector, or is IAG still the best? Let’s explore.

IAG against its European peers

IAG is significantly cheaper than easyJet And Ryanair when we look at conventional measures of stock valuation, such as the price-to-earnings (P/E) ratio. It currently trades at around 4.3 times forward earnings, while easyJet trades at 6.8 times and Ryanair at 11.2 times.

Additionally, even considering IAG’s debt levels, the company appears attractively valued with an EV/EBITDA ratio of 3.4, compared to Ryanair’s 7.7. However, easyJet appears to be the cheapest on this measure, with an EV/EBITDA ratio of 2.4 times.

Personally I don’t think there is much when comparing easyJet and IAG. However, I tend to prefer IAG due to the diversity of airlines under its umbrella, including British Airways and Iberia.. Rather than being purely European and focused on economy class, IAG is global and has a luxury offering.

One thing I like about both of these companies is that they operate primarily Airbus plane and not Boeing plane. In fact, easyJet is exclusively Airbus. Ryanair, on the other hand, is exclusively Boeing. I’m not convinced the Boeing saga is over and I’m not flying one of their planes.

Looking in the United States

US airline stocks such as Delta Airlines, American airlinesAnd Southwest Airlines present viable options. However, these airlines tend to operate more Boeing aircraft than IAG and easyJet, raising similar concerns to Ryanair, given Boeing’s recent safety and delivery issues. Delta and American have varied fleets, while Southwest is primarily Boeing.

The story continues

I’m sure some investors may think I’m exaggerating Boeing’s risks here, but I’d rather not take any risks. An interesting alternative to the aforementioned airlines — which are not. 1, no. 2, and no. 4th by fleet size globally — is a regional airline SkyWest.

SkyWest stock has surged 150% in the past 12 months, but it is expected to continue growing earnings at a healthy pace over the medium term. The forward P/E ratio currently stands at 10.4 times, but is expected to fall to 8.5 times by 2027. It also operates an attractive fleet, including Bomber And Embraer-aircraft manufactured.

SkyWest is an investment I would consider as an alternative to IAG. It operates as a service provider to major airlines under long-term contracts, thereby reducing risks that may arise due to economic or geopolitical events. The company does not cover fuel, which could be a risk, but I understand that its major partners actually provide the fuel needed to operate.

Additionally, with the US Federal Reserve expected to maintain higher interest rates than the Bank of England, the dollar is poised to strengthen. This means that investing today could benefit from the likely depreciation of the pound sterling.

The article Best Alternatives to Consider as IAG Share Price Climbs! appeared first on The Motley Fool UK.

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James Fox holds positions within the International Consolidated Airlines group. The Motley Fool UK has no position in any of the stocks mentioned. The opinions expressed about companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a broad range of information makes us better investors.

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