LTM

We rate LATAM AIRLINES GROUP S.A. (LTM) as a Buy with a composite score of 69.9/100 at a current price of $57.96. The stock scores above average across the majority of our six quantitative factors and ranks #95 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in value (92th percentile) and momentum (80th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (41/100), Low uncertainty, and Exemplary capital allocation.

Key items to watch: quarterly earnings execution and sector-level competitive dynamics. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

LATAM AIRLINES GROUP S.A. holds an above-average position (#20 of 50) within the Transportation, Communications, Electric, Gas, And Sanitary Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 69.9/100 places it at rank #95 in our full 7,333-stock universe. At $8.3B in market capitalization, LATAM AIRLINES GROUP S.A. is a mid-cap player in the Transportation, Communications, Electric, Gas, And Sanitary Services space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 10% and favorable momentum (80th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 25% (-29.7pp vs sector) narrow to operating margins of 12% (-5.5pp vs sector) and net margins of 7.6%, yielding a gross-to-net conversion rate of 30%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $57.96, LATAM AIRLINES GROUP S.A. appears undervalued relative to its fundamentals. Our value factor score of 92/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 35437.5x (a 209341% premium to the sector median of 16.9x), EV/EBITDA of 2.1x (discounted to peers), P/B of 11.5x, P/S of 0.3x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Low uncertainty rating to LATAM AIRLINES GROUP S.A.. The company exhibits strong financial stability with a beta of 0.69, conservative leverage (0% D/E), and a stability factor in the 60th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.69 — while defensive, this may indicate limited upside participation in bull markets; elevated valuation multiple (P/E 35437.5x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 60th percentile and quality factor at the 72th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (0% D/E) limits balance sheet risk; above-average stability (60th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate LATAM AIRLINES GROUP S.A.'s capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 272.5%, disciplined leverage (0% D/E). Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — LATAM AIRLINES GROUP S.A. meets this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. We note that the combination of 25.6% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, LATAM AIRLINES GROUP S.A. receives a Buy rating with a composite score of 69.9/100 (rank #95 of 7,333). Our quantitative framework assigns a Narrow Moat (41/100, trend: stable), Low uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 72/100.

Our analysis supports a constructive view on LATAM AIRLINES GROUP S.A.. The combination of identifiable competitive advantages, low uncertainty, and exemplary capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.