Where might IAG's share price go in the next 12 months? Here's what the experts say

Rarely do I expect to see bullish analysts about International Consolidated Airlines (LSE: IAG) share price.

But most of them offer the stock as a Buy Now. And the 12-month average price is around 243p.

With the price at 211p, as I write, that would be a 15% profit. Add in a 2.4% weather dividend yield, and if it goes as well as they suggest, we could have a nice total return.

Even better

Looking around, I'm even seeing higher targets for 450p and above. Do I think IAG's share price will more than double in the next 12 months?

It may sound like a few heads up in the clouds and airplanes. But a share price of 450p will push the price-to-earnings (P/E) ratio, based on FY 2024 forecasts, only up to 9.7.

I think that might be too optimistic in the current economic climate, and given the cyclical nature of the airline business. But I can't call it offensive.

The current share price implies a forward P/E of only 4.6. And that makes me scratch my head and think that stocks might be getting a lot cheaper.

But wait…

These P/E ratios do not include debt, and I think we need to fix that. In the interim period on 30 June, total debt stood at €6.4bn, or £5.4bn at the current exchange rate.

International Consolidated currently has a market capitalization of £10.3bn. To correct that, we would see a P/E equal to seven. And on the subject of the highest share price we will be looking at around 15.

The extent to which debt should affect stock valuation should depend on the nature of the company, I think. Some work better under debt financing than others.

BT Groupfor example, it has been carrying very high debts for years. But it seems to keep earnings coming in and dividends coming out, and debt servicing costs aren't that high. As long as that continues, shareholders seem happy enough.

External risk

But a company like International Consolidated Airlines faces many external risks. By that, I mean things beyond its control. Like fuel costs, pandemics, recessions, world politics…

And it has no recourse to the safety of providing essential services – taking a flight is a take-it-or-leave-it decision.

It is because of these risks that I have never bought airline stocks. However, if I look at that P/E of only 4.6 (and still about half of FTSE 100 ratio when adjusted for debt), I can't help but see International Consolidated as a buy candidate.

The debt is falling

Debt is also falling, down 30% in the 12 months to June. And the board set “aiming to stay below 1.8x net debt to EBITDA before special items“.

So will I buy? Probably not, because I still don't like the dangers of flying. I just see a lot of Footsie stocks out there looking safe. And it paid big dividends.