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Wizz Air (LSE: WIZZ) shares have had a crazy few days. On April 8, when the Iran-US ceasefire was announced, the share price rose 16% in a single day. It was the biggest winner across the FTSE 350. A £5,000 stake would have turned into £5,813 inside a day, although it has since dropped to £5,536.
But with the good news rolling in, it got a few investors wondering whether this was a golden chance to buy one of the UK’s cheapest shares. The price-to-earnings (P/E) ratio is sitting at a hard-to-believe 3.38. Let’s take a look at whether that tiny P/E is a no-brainer bargain or too good to be true.
Proximity
Let’s begin with that P/E ratio. Three is almost ridiculous. The FTSE 100 average is 18, so in comparison to an average Footsie stock, you’re getting nearly six times as much profit for every £1 in share price you buy. What’s going on here?
The basic answer is that Wizz Air is not a company with a long history of reliable earnings. The firm made a loss in financial years 2022 and 2023, then made a profit in 2024 and 2025.
We can see further evidence for a lack of stability here in the analyst ratings. At the top end, one analyst is predicting a £25 share price target for the next 12 months – a 162% increase. At the bottom end, one analyst is forecasting £5 – a 45% decrease.
Another factor is that Wizz Air is more affected by issues in the Middle East than most. It’s an ultra-low-cost airline from Hungary – think the easyJet of Eastern Europe – and its proximity to the conflict means there are more routes that will get cancelled while the airspace is closed.
Big question
So here’s the big question: is this a good stock to buy? Should investors be snapping up dirt cheap Wizz Air shares or are these to be avoided at all costs?
The first thing to point out is to expect no miracles in the short term. The Iran war has already administered a £50m hit to the firm’s finances and the latest forecasts suggest it will be loss-making for the next two years. In other words, there might not be a P/E ratio to look at in 12 months time because there’s no ‘E’ (earnings) part of that equation.
On the other hand, it’s times like these when all seems disastrous that can end up being the best times to buy. Airlines were in crisis too in 2022 after the pandemic struggles combined with rising inflation and fuel costs. Someone buying British Airways owner IAG in the middle of that mess would have seen the shares quadruple in value since.
My decision? I won’t be buying. I have a little exposure to the airline industry already. And I’m not interested in adding more given all the risks. I’ll say that it will come as no shock if Wizzair goes on a tear in the years to come however.
This story originally appeared on Motley Fool
