International Consolidated Airlines Group (LSE: IAG) shares have been among the standouts of the last two years. The owner of airlines like British Airways, Aer Lingus, and Vueling has been flying higher and higher after recovering from the disaster to the industry that was the COVID-19 pandemic.

Since 19 January 2024, the shares are up a stratospheric 182.1%, making IAG, as it’s known, the eighth-biggest riser on the FTSE 100 in the last two years. The dividend was reinstated during that period too, bumping up total returns even further.

A £10,000 stake invested in the airline group on that date would now be worth £19,040 by my calculation. And there could be plenty of runway left for further growth too.

Cheap stuff

It only takes a few seconds of browsing the financial data on IAG shares to see something jump out at you – an eye-poppingly cheap valuation. Compared to the amount a share changes hands for, IAG are making quite a lot of profit.

The stock is trading at around eight times yearly earnings. It doesn’t get much cheaper than that. That rival easyJet trades at a similar price-to-earnings ratio does tell us this might be a sector-wide issue.

What’s the reason? The ‘ghosts of COVID-19’ could be one factor. Investors might be demanding a premium because of the risk associated with international travel. The threat of another pandemic or perhaps even a war might mean the cheap P/E ratio is one to stay away from.

On the other hand, we might simply be at maximum panic and this is a great opportunity. As Warren Buffett likes to remind us: “Get greedy when others are fearful.”

Coming up

What might we expect in the future? Forecasts can help us to some degree. While the predictions of analysts can never be taken for gospel, the consensus is often accurate for the next year or two.

And overall, things look bright. Both revenue and earnings are set to increase in the years ahead. Dividends are stable too – though this might be a negative for some investors, as the yield of 2.32% is on the lower side for the FTSE 100.

And all this means the analysts’ recommendations are a broad smattering of Buys and Outperforms. In fact, of the 17 analysts covering the stock, only one has the shares down as a Sell.

The consensus price target for the next 12 months is for a 17.8% increase – which would make 2026 another excellent year. One analyst is so bullish that they’re expecting a 65% increase in share price over the next year.

While the boom of the last two years is unlikely to repeat, I’d say there’s plenty of value on here for anyone aware of the risks. One to consider, I think.