This cheap share looks wildly mispriced to me — and the market hasn’t caught on yet
Spotting a genuinely cheap share in todayâs market is not easy, but one name keeps standing out to me.
Its valuation looks disconnected from its longâterm earnings potential, and that gap could offer patient investors a compelling opportunity.
So, how high could budget airline Wizz Airâs (LSE: WIZZ) shares go in the coming years?
A valuation puzzle
Despite the rebound in European travel since the end of Covid, the market still seems reluctant to reârate the company. The stock is down more than 60% from where it traded just before the widespread onset of the pandemic in early 2020.
This comes even as sectorâwide passenger numbers, revenue, and load factors have all recovered strongly. As part of this in recent months, Wizz Airâs balance sheet has stabilised, and its operational performance has improved.
This makes the current valuation look more like a hangover from past turbulence than a reflection of todayâs fundamentals.
The current fundamentals
Its H1 fiscal year 2026 results saw passenger numbers climb 9.8% year on year to 36.5m, with revenue increasing 9% to â¬3.3bn (£2.9bn).
These volume gains fed through into higher earnings, with EBITDA jumping 18.8% to â¬981.2m. Operating profit soared 25.8% to â¬439.2m, far outstripping analyst projections for â¬367m.
The airline announced the closure of its Abu Dhabi and Vienna bases to be completed by March this year. This reflects a pivot away from high-cost locations to the opening of new bases at lowerâcost airports.
Its preceding Q1 numbers saw a 10.6% increase in passengers to 17m, and a 13.4% jump in revenue to â¬1.43bn. EBITDA rose 9.3% to â¬300m. Net profit jumped from just â¬1.2m in the same period of 2025 to â¬38.4m.
One risk to this growth is the ongoing Pratt & Whitney engine inspections that continue to see some aircraft grounded. This could weigh on performance for longer than expected. Others include any significant rise in fuel and/or labour costs.
Nevertheless, consensus analystsâ forecasts are that its earnings will grow by a very robust 29% a year to endâ2028.
Whatâs its true worth?
If these forecasts are right — although they are not guaranteed — Wizz Airâs longâterm earnings power could look very different from what todayâs depressed share price implies.
A discounted cash flow (DCF) analysis identifies where a stock should trade by âdiscountingâ future cash flows back to today. Some analystsâ DCF modelling is more cautious than mine, depending on the variables used.
Nevertheless, my DCF analysis — reflecting consensus analystsâ earnings growth projections and a 7.5% discount rate — estimates Wizz Airâs fair value at £28.83 a share. That is more than double where the stock trades now.
And because asset prices can gravitate towards their fair value over time, it suggests a potentially terrific buying opportunity to consider if this modelling proves accurate.
My investment view
Now in the later stages of my investing cycle, Wizz Air feels too risky for the balance of my portfolio. I prefer steadier, incomeâgenerating holdings at this point.
However, for investors earlier in their investing journey, with a greater tolerance for shortâterm price swings, the shares look worth considering.
If the company delivers the earnings growth analysts expect, the potential longâterm price rises could be big.
The post This cheap share looks wildly mispriced to me — and the market hasnât caught on yet appeared first on The Motley Fool UK.
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Simon Watkins has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.
