Is It Time To Buy American Airlines Stock?

American Airlines (NASDAQ: AAL) stock is down 27% this year. Even with fuel costs trending lower, investors were spooked by the company’s sharp reset of guidance, including a projected loss for the third quarter. Weak U.S. demand is also pressuring bookings and unit revenues, and ongoing balance-sheet and labor-cost issues have kept sentiment negative, despite a solid second-quarter performance.

This leads to the big question: Is AAL a buy or a sell at its current price of around $12? The stock certainly seems risky, but its low valuation might make it a good buy.

When we compare American Airlines’ current valuation to its recent operating performance and financial health, we see a company with a weak performance and financial condition. However, because the valuation is so low, there’s still potential for growth. Our detailed analysis below, looks at key factors like Growth, Profitability, Financial Stability, and Downturn Resilience to explain our conclusion.

That being said, if you seek an upside with less volatility than holding an individual stock, consider the High Quality Portfolio. It has comfortably outperformed its benchmark—a combination of the S&P 500, Russell, and S&P MidCap indexes—and has achieved returns exceeding 91% since its inception. Separately, see – Google’s Nano Banana Moment: 50% Upside For GOOG Stock?

Image by Bilal EL-Daou from Pixabay

How Does American Airlines’ Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, AAL stock looks cheap compared to the broader market.

• American Airlines has a price-to-sales (P/S) ratio of 0.2 vs. a figure of 3.2 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 5.2 compared to 21.1 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 14.4 vs. the benchmark’s 24.2

How Have American Airlines’ Revenues Grown Over Recent Years?

American Airlines’ Revenues have declined marginally over recent years.

• American Airlines has seen its top line grow at an average rate of 10.8% over the last 3 years (vs. increase of 5.3% for S&P 500)
• Its revenues have grown 1.5% from $53 Bil to $54 Bil in the last 12 months (vs. growth of 5.1% for S&P 500)
• Also, its quarterly revenues grew 0.4% to $14 Bil in the most recent quarter from $14 Bil a year ago (vs. 6.1% improvement for S&P 500)

How Profitable Is American Airlines?

American Airlines’ profit margins are much worse than most companies in the Trefis coverage universe.

• American Airlines’ Operating Income over the last four quarters was $2.7 Bil, which represents a poor Operating Margin of 5.1% (vs. 18.6% for S&P 500)
• American Airlines’ Operating Cash Flow (OCF) over this period was $4.1 Bil, pointing to a poor OCF Margin of 7.5% (vs. 20.3% for S&P 500)
• For the last four-quarter period, American Airlines’ Net Income was $567 Mil – indicating a very poor Net Income Margin of 1.0% (vs. 12.6% for S&P 500)

Does American Airlines Look Financially Stable?

American Airlines’ balance sheet looks weak.

• American Airlines’ Debt figure was $37 Bil at the end of the most recent quarter, while its market capitalization is $8.2 Bil (as of 9/16/2025). This implies a very poor Debt-to-Equity Ratio of 454.1% (vs. 20.9% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $8.6 Bil of the $64 Bil in Total Assets for American Airlines.  This yields a strong Cash-to-Assets Ratio of 13.5% (vs. 7.0% for S&P 500)

How Resilient Is AAL Stock During A Downturn?

AAL stock has fared much worse than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on AAL stock? Our dashboard – Will You Be Comfortable Buying American Airlines Stock? – has a detailed analysis of how the stock performed during and after previous market crashes.

Inflation Shock (2022)

• AAL stock fell 57.7% from a high of $25.82 on 2 June 2021 to $10.92 on 27 October 2023, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is 18.66 on 22 January 2025 and currently trades at around $12.40

COVID-19 Pandemic (2020)

• AAL stock fell 70.3% from a high of $30.47 on 12 February 2020 to $9.04 on 15 May 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock is yet to recover to its pre-Crisis high

Global Financial Crisis (2008)

• AAL stock fell 97.2% from a high of $61.96 on 16 January 2007 to $1.76 on 15 July 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock is yet to recover to its pre-Crisis high

Putting All The Pieces Together: What It Means For AAL Stock

In summary, American Airlines’ performance across the parameters detailed above are as follows:

• Growth: Moderate
• Profitability: Very Weak
• Financial Stability: Weak
• Downturn Resilience: Very Weak
• Overall: Weak

Overall, American Airlines has performed weakly across key financial metrics, which is reflected in its low valuation. However, there are potential positive catalysts on the horizon, such as falling fuel prices and an expected interest rate cut by the Federal Reserve.

Of course, we could be wrong in our assessment, and investors may not be willing to pay a premium for AAL due to its poor financial performance. However, we believe the stock could be a good long-term pick. If you have a 3-5 year investment horizon, the combination of its low valuation and these potential positive developments makes it an attractive option.

While AAL stock looks promising, investing in a single stock can be risky. On the other hand, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Invest with Trefis Market-Beating Portfolios

See all Trefis Price Estimates