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LATAM Airlines Group S.A. (LTM) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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LATAM Airlines Group S.A. (LTM)

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Intrinsic Value (DCF)

Current$58.88
→
Intrinsic$84.14
+43%
$52.15$84.14$144.96
Market implies 1% growth for 5 years
DCF analysis suggests LTM could have 43% upside at 8% growth — verify assumptions match your view.
At $59, the market prices in only 1% growth — below historical 8%, suggesting low expectations.
Range: Bear $52 → Bull $145. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →4%6%8%10%
8%$103$114$126$138
10%$69$76$84$93
12%$49$55$61$68
14%$37$42$46$52

Bull Case

  • Bull case ($145) offers 146% upside at 10% growth, 9% discount
  • 30% margin of safety vs. base case estimate
  • Market-implied growth (1%) ≤ historical CAGR (8%)

Bear Case

  • Bear case ($52) implies 11% downside at 6% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$1.82B
Year 2$1.97B
Year 3$2.12B
Year 4$2.29B
Year 5$2.48B
Terminal$36.46B

📐 Model Inputs

Growth Rate8.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$1.69BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is LTM stock undervalued or overvalued?
🟢 UNDERVALUED

LTM trades at $58.88 vs. our DCF-derived intrinsic value of $84.14, implying +49% upside. At a 10.0% WACC and 8.0% projected FCF growth, the market appears to be underpricing the present value of LTM's future cash flows. The bear case ($56.22) still suggests upside, providing margin of safety.

What is LTM's intrinsic value?

Using a 5-year DCF model: Base FCF of $1.69B, projected at 8.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $5.19B net debt and dividing by 0.30B shares: Bear $56.22 | Base $84.14 | Bull $121.49. Current price $58.88 implies +49% to base case.

How is LTM's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 8.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($30.62B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 18.2x.