Wizz Air’s (LSE: WIZZ) share price has fallen a long way from its 12 June 12-month traded high of £25.46.
The latest factor weighing on the stock has been fears of a global recession after the US’s swingeing tariffs announcement.
Before that the main element pushing the share price lower was the grounding in June of 46 of its planes.
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If I were still a senior investment bank trader, I would have sold the stock too for a quick profit. Global recession is a risk for the firm, certainly. And there is always the additional risk of more technical problems grounding aircraft.
However, the average length of a US-led recession since 1945 is around 10 months, according to the National Bureau of Economic Research. And Wizz Air has signed a new agreement with Pratt & Whitney that covers the costs associated with grounded aircraft. It is also negotiating for spare engines for its 177 Airbus A321neo planes.
As a private investor nowadays I look for long-term opportunities over and above short-term risks. And I have two key criteria I look for in stocks I am targeting for big share price gains.
Earnings growth is a critical factor to me
The first quality I want to see in any such stock is a strong earnings growth forecast. This ultimately underpins gains in companies’ share prices (and dividends) over the long term.
Consensus analysts’ projections are that Wizz Air’s earnings will increase by 27.9% each year to end-2027.
The firm’s Q3 2025 results released on 30 January look extremely positive to me in this respect. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) soared 740% quarter on quarter to €157.1m from €18.7m. And its EBITDA margin jumped to 13.3% from 1.8%.
The airline also saw record traffic of 15.5m passengers over the period, up from Q3 2024’s 15.1m. Its load factor also increased — to 90.3% from 87.6%. Broadly speaking, the higher the load factor, the more efficiently an airline is utilising its seating capacity.
Under-pricing to fair value is also crucial
High earnings growth should power a stock’s price higher over time and it is even better if this is from a low starting point.
To ascertain if any share is at such a level I assess how much value remains in it compared to its price. It is always useful for me to bear in mind that value and price are not the same thing.
The principal method I use to do this is a discounted cash flow (DCF) analysis. This shows where any stock’s price should be, based on future cash flow forecasts for the underlying business.
The DCF for Wizz Air shows its shares are 67% undervalued at their current price of £15.64. Therefore, the fair value for the stock is £47.39, although market forces could move it lower or higher.
Will I buy the shares?
Aged over 50, I am focused on high-yield stocks as I want to maximise my dividend income so I can reduce my working commitments. Wizz Air currently pays no dividends.
However, if I were even 10 years younger, I would buy the shares based on the firm’s huge earnings growth potential. This should drive the stock price much higher over time, in my view. I believe it is worth investors considering.
