Should You Buy LATAM Airlines Stock At This Price?

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LATAM Airlines (LTM) stock trades at 8.0 times earnings, compared with 23.0 for the median S&P 500 company. The shares fell 19.0% from July 28 to October 26, 2026, while the S&P 500 gained 3.6%. The current price appears to assume LATAM’s profit will shrink. The stock is a bargain only if the airline maintains its profit recovery and its fares catch up with a much higher fuel bill. So how solid is the profit behind that multiple?

LATAM’s Margin Has Risen Every Year Since 2021

Over the longer run, LATAM’s profit has recovered strongly. LATAM’s operating margin rose in every twelve-month period ending in June since 2021, climbing from a loss of 31.4% of revenue to a profit of 15.2% in the four quarters to June 30, 2026. This latest margin sits above the 13.4% average of the last three such periods. It is also about twice the 7.4% that Delta Air Lines earned over its own latest four quarters.

Sales have also grown rapidly. LATAM’s revenue rose 20.5% over the twelve months to June, compared with an 8.4% increase for the median S&P 500 company. Premium cabins made up 29% of passenger revenues in fiscal Q2 2026, management said. Net income reached $1.56 billion over those twelve months, up from $1.17 billion a year earlier, meaning the low multiple is measured against a profit that rose.

LATAM Raised Fares But Its Margin Still Fell

Fares have covered only part of the fuel bill so far. LATAM’s operating margin fell to 5.5% in fiscal Q2 2026, down from 12.9% a year earlier, and management said total fuel costs rose 93% in that quarter. At the same time, net income dropped to $125 million, from $242 million a year earlier.

On the August 5 call, management said LATAM responded with fare increases and targeted adjustments to its capacity, which still grew 8.9% from a year earlier. Passenger unit revenue rose 17.5% in the quarter, which management said allowed the airline to pass through a significant portion of the higher fuel costs.

On the same call, management raised the full-year 2026 guidance for adjusted EBITDA, LATAM’s own profit measure, to a range of $4.1 billion to $4.4 billion. This marks a $250 million increase at the midpoint. Management based this guidance on jet fuel at $147 a barrel in the third quarter, down from $170 in the earlier outlook. According to news reports, LATAM said on October 20 that its capacity growth was tracking to the lower end of its guidance as fuel stays high.

How Much Debt Does LATAM Carry?

LATAM’s total debt equals 72.5% of its market value, compared with 19.4% for the S&P 500 taken as a single company. That debt stood at $9.03 billion on June 30, 2026, measured against $2.7 billion in cash and short-term investments.

On the August 5 call, management placed adjusted net leverage at 1.5 times, which sits below the 2 times allowed by the company’s financial policy. Management also counts new aircraft as debt regardless of how LATAM pays for them, including the Embraer E2 jets that LATAM Airlines Brazil said in August it expected to receive from October to December 2026. The P/E looks only at the shares and leaves out the debt. So if either the margin recovery or the fare increases fall short, the profit behind the multiple shrinks while the debt stays the same.

A buyer at this price is betting that the fuel squeeze in fiscal Q2 2026 will pass, and that LATAM’s fares can cover the higher fuel bill until it does. The margin recovery has the longer record, while whether fares catch up with fuel is less settled. LATAM’s operating margin for fiscal Q3 2026, compared with 18.2% a year earlier, will be the number to watch when the company reports that quarter.

Does This Mean You Should Act On LTM?

Our purpose is to inform you with unique data so you make the right investment decisions. That said, betting on a single stock is always risky, no matter which direction you choose.

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