Stock Analysis on Net

American Airlines Group Inc. (NASDAQ:AAL)

This company has been moved to the archive! The financial data has not been updated since February 21, 2024.

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.


Intrinsic Stock Value (Valuation Summary)

American Airlines Group Inc., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 7.93%
01 FCFF0 2,489
1 FCFF1 2,473 = 2,489 × (1 + -0.61%) 2,292
2 FCFF2 2,474 = 2,473 × (1 + 0.04%) 2,124
3 FCFF3 2,491 = 2,474 × (1 + 0.68%) 1,981
4 FCFF4 2,524 = 2,491 × (1 + 1.32%) 1,860
5 FCFF5 2,574 = 2,524 × (1 + 1.96%) 1,757
5 Terminal value (TV5) 43,951 = 2,574 × (1 + 1.96%) ÷ (7.93%1.96%) 30,004
Intrinsic value of American Airlines Group Inc. capital 40,018
Less: Long-term debt and finance lease liabilities, including current maturities (fair value) 32,816
Intrinsic value of American Airlines Group Inc. common stock 7,202
 
Intrinsic value of American Airlines Group Inc. common stock (per share) $11.00
Current share price $14.79

Based on: 10-K (reporting date: 2023-12-31).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Weighted Average Cost of Capital (WACC)

American Airlines Group Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 9,684 0.23 18.50%
Long-term debt and finance lease liabilities, including current maturities (fair value) 32,816 0.77 4.82% = 6.47% × (1 – 25.57%)

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 654,756,816 × $14.79
= $9,683,853,308.64

   Long-term debt and finance lease liabilities, including current maturities (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (26.67% + 31.72% + 21.78% + 22.42% + 25.27%) ÷ 5
= 25.57%

WACC = 7.93%


FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

American Airlines Group Inc., PRAT model

Microsoft Excel
Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Interest expense, net 2,145 1,962 1,800 1,227 1,095
Net income (loss) 822 127 (1,993) (8,885) 1,686
 
Effective income tax rate (EITR)1 26.67% 31.72% 21.78% 22.42% 25.27%
 
Interest expense, net, after tax2 1,573 1,340 1,408 952 818
Add: Dividends declared on AAG common stock 43 180
Interest expense (after tax) and dividends 1,573 1,340 1,408 995 998
 
EBIT(1 – EITR)3 2,395 1,467 (585) (7,933) 2,504
 
Current maturities of long-term debt and finance leases 3,632 3,274 2,489 2,797 2,861
Long-term debt and finance leases, net of current maturities 29,270 32,389 35,571 29,796 21,454
Stockholders’ deficit (5,202) (5,799) (7,340) (6,867) (118)
Total capital 27,700 29,864 30,720 25,726 24,197
Financial Ratios
Retention rate (RR)4 0.34 0.09 0.60
Return on invested capital (ROIC)5 8.65% 4.91% -1.90% -30.84% 10.35%
Averages
RR 0.34
ROIC -1.77%
 
FCFF growth rate (g)6 -0.61%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 See details »

2023 Calculations

2 Interest expense, net, after tax = Interest expense, net × (1 – EITR)
= 2,145 × (1 – 26.67%)
= 1,573

3 EBIT(1 – EITR) = Net income (loss) + Interest expense, net, after tax
= 822 + 1,573
= 2,395

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [2,3951,573] ÷ 2,395
= 0.34

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 2,395 ÷ 27,700
= 8.65%

6 g = RR × ROIC
= 0.34 × -1.77%
= -0.61%


FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (42,500 × 7.93%2,489) ÷ (42,500 + 2,489)
= 1.96%

where:

Total capital, fair value0 = current fair value of American Airlines Group Inc. debt and equity (US$ in millions)
FCFF0 = the last year American Airlines Group Inc. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of American Airlines Group Inc. capital


FCFF growth rate (g) forecast

American Airlines Group Inc., H-model

Microsoft Excel
Year Value gt
1 g1 -0.61%
2 g2 0.04%
3 g3 0.68%
4 g4 1.32%
5 and thereafter g5 1.96%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= -0.61% + (1.96%-0.61%) × (2 – 1) ÷ (5 – 1)
= 0.04%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= -0.61% + (1.96%-0.61%) × (3 – 1) ÷ (5 – 1)
= 0.68%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= -0.61% + (1.96%-0.61%) × (4 – 1) ÷ (5 – 1)
= 1.32%