Qantas Stock Analysis ASX: QAN (2024)

• September 18, 2023

There is a vast array of different ways people analyse stocks before making a trade decision. Some that spring to mind are charting, valuation and ESG scores as they become more important. Join us in this episode as we put Qantas through the mincer and see what comes out the other side.

Stock Performance

Benchmarking is a method of comparing your investment to another by assessing the returns of one asset vs another. Running this analysis over Qantas shares paints a bleak picture and shows that overall Qantas has not served its investors too well over the years. Host Andrew Baxter explains that in 2007, Qantas received a buyout offer for about $5.45 per share and 16 years later, the stock price is about $5.65. The shareholders turned down the buyout offer at the time, believing it was not an offer that reflected Qantas’ value and all these years later we see Qantas still only barely higher than that offer. Comparing the index to Qantas over the same period, the ASX 200 has returned nearly 30% in the same period of time that Qantas has returned 8%. This just goes to show that what many consider a market darling here in Australia has not actually proven to be that great of an investment. Overall, once you crunch the numbers, it is pretty clear that Qantas have not performed very well over the last 15 years or so.

Profitability

Qantas has been profitable overall, but there are some caveats to consider. During the pandemic, Qantas was the recipient of a significant amount of taxpayer subsidies to help the company. Host Andrew Baxter explains that Qantas in fact received well over $2 billion in relief over that period of time after pushing quite hard. Although it was made clear that the relief was not required to be paid back, a range of other companies that received subsidies through the pandemic made efforts to repay some of the subsidies they received after they found themselves doing quite well. There were no rules in place but the businesses that ended up doing well after receiving help from the government and the taxpayer did their part to return the favour and take some strain off taxpayers. From a pub test perspective as well as a brand optics perspective, it may have been a good move for Qantas to follow suit of some other big Aussie businesses and try to return some of the subsidy they received.

Cutting Costs vs Making More

When we hear about record profits, the assumption is the company has been making money hand over fist, but the reality can be very different. Qantas’ major change was a reduction in debt, which reflected very well on their earnings report. Host Andrew Baxter explains that a lot more of their profitability stems from saving money rather than making it than meets the eye. Qantas’ fleet of planes is old compared to how they used to be back in about 2008, as a matter of fact almost double. Compared to some of the other big name airlines around the world now, the fleet also appears very old for what is considered a top tier airline. Updating some of their current fleet would hurt their balance sheet but could possibly have a greater effect in the long run with greater customer experiences on newer planes, not to mention potentially improved safety.

ESG

ESG is a tricky space for airlines because they do burn a lot of fossil fuels inherently by virtue of their business. In the context of its peer group, Qantas is well below average in terms of its ESG score and with ESG being right at the forefront for many investors, it certainly would be important to get higher on the list. Host Andrew Baxter explains that politically there are some things going on with Qantas that are interesting and may not be perceived well from an ESG perspective. Firstly, there was a lot of conjecture about the blocking of Qatar Airways from certain flight routes in Australia and a lack of clarity around the surrounding politics of that. Now, the Prime Minister’s son has been granted access to the Chairman’s Lounge of Qantas, which is not an easy lounge to gain access to. Optically,the whole series of events seems odd to say the least.