Delta's Profits vs. GE's Premiums: Is the Market Mispricing These 2 Stocks?
One stock is richly valued as the market assumes long-term growth driven by end demand from one of the same airlines that is lowly valued.
Overview
The valuation discrepancy between GE Aerospace (NYSE: GE) and Delta Air Lines (NYSE: DAL) speaks volumes about how investors view the commercial aerospace industry. While that view has historical precedent, I think the industry has changed, and the market is at least mispricing Delta Air Lines.
The chart below goes a long way to explaining matters. Network airlines like Delta and United Airlines are trading on very attractive valuations relative to aerospace equipment supplier GE Aerospace. The interesting thing is that GE, and its joint venture with Safran, CFM International, are leading players in the commercial engine market that powers airlines' flight departures, so why the valuation discrepancy between the main users of aircraft engines and the key supplier of them?
Data source: Visible Alpha. Chart by author.
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Source
Originally published at www.fool.com.