Delta Air Line: Valuation Analysis Of DDM And ROPI

Delta Air Line’s stock closed at a split-adjusted price of $43.59 on April 26th, 2016. The DCF results yield a Delta Air Line stock value estimate of $130.69 as of December 31, 2016. This estimate suggests that Delta Air Line’s stock is undervalued on that date because the estimated stock price is higher than the actual price.

Although the results from DCF are the same as what we get from ROPI, the DCF is a better model to perform valuation analysis of Delta Air Lines compared to DDM and ROPI for the following reasons:

1. DCF is a valuation that is popular and widely accepted model.
Unlike DDM (Dividend Discount Model), this approach is that it can be used with a wide variety of forms that don’t pay dividends, and even for companies that
For the most part, free cash flow is a reliable measure that cuts through a lot of the arbitrariness and "guesstimates" involved in reported earnings. Regardless of whether a cash outlay is counted as an expense or turned into an asset on the balance sheet, free cash flow tracks the money left over for investors. However, ROPI can only perform the best when financial statements reflect all parts of assets and liabilities, even including items on off-balance-sheet. According to the financial information from Delta Air Lines, we can easily tell that this company hasn’t demonstrated all of assets and
Today there are quite a few of large cap companies with variable revenue drivers. This feature makes it challenging to find a relevant peer group, company, or even industry multiples. In our selected comapnies, Delta Air Line’s (DAL), Jetblue (JET) and American Airlines (AAL) are large airline service companies for business and personal use. However, both DAL and JET revenue also are derived from the flight service business. AAL is also a competitor in this area, but American Airlines derives its revenue mostly from their debts. Apparently, neither of AAL, DAL and JET can be in a peer group in order to use a peer group