Despite hearing about even more brilliant revenues growth over at BBA Aviation(LSE: BBA), the market still does not fully appreciate the flying ace's compelling long-term profits outlook, in my opinion. And this is reflected in its ultra-low valuations.
The aviation services giant has seen trading momentum pick up in recent months, BBA advising on Tuesday that revenues jumped 10.2% during the 10 months to October thanks to "good" organic growth at its Signature flight support division, as well as the positive impact of recent acquisitions.
Recent expansion at Signature has underpinned brilliant sales growth there (turnover advanced 14.2% in January-October, or 3.8% on a like-for-like basis). And BBA can expect the top line to keep on rising as robust economic growth in the US drives flight traffic.
The company noted today that B&GA flight movements had jumped 3.7% during the first nine months of 2017, and 4.3% in the three months ending September.
Against this backcloth, City analysts are expecting earnings to balloon 17% in 2017 and 10% in 2018. And current projections make the FTSE 250 share brilliant value -- while a forward P/E ratio of 18.5 times may soar above the widely-considered value watermark of 15 times, a corresponding PEG reading of 1.1 suggests the flying ace is actually brilliantly priced relative to its growth potential.
What's more, it also offers plenty for income chasers to get excited about. 2016's total dividend of 12.75 US cents per share is anticipated to jump to 13.1 cents this year and again to 14.1 cents in 2018.
As a consequence, yields clock in at a healthy 3.1% and 3.3% for this year and next.
The FTSE 100 star is expected to deliver earnings expansion of 5% and 6% in 2017 and 2018, and these estimates make the British Airways owner stunning value for money -- it sports a forward P/E rating of just 5.5 times.
On top of this, IAG is expected to keep dividend yields moving ahead of the British blue-chip average. A predicted 27.2 euro cent per share reward for 2017 produced a chunky 4% yield, and this marches to 4.3% for next year thanks to an expected 29.2 cent payment.
The business saw passenger revenues increase 1.6% during June-September, to EUR5.9bn, and IAG has big plans for its other brands as it steadily increases capacity through to 2022 in a bid to deliver strong and sustained sales growth.
In particular, the London-based company's budget airlines like Aer Lingus and Vueling carry plenty of earnings potential as travellers move increasingly towards low-cost carriers. And of course its LEVEL transatlantic carrier offers a route into the potentially-explosive long-haul value segment.
With IAG also doubling down on its cost-cutting initiatives, I am convinced it should remain a reliable earnings generator long into the future.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended BBA Aviation. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.