Shares in British Airways owner International Consolidated Airlines (LSE: IAG), or IAG for short, are enjoying a period of strength right now. Over the last 12 months, they’ve risen about 100%. Could the shares be the next Rolls-Royce (that is, a ‘multibagger’ for investors)? Let’s discuss.

An attractive set-up

IAG shares certainly appear to have a lot going for them today.

For starters, the company has momentum at present. In the third quarter of 2024, revenue rose by 7.9% year on year while operating profit jumped by 15.4%. On the back of this performance, the company announced a €350m share buyback. “Demand remains strong across our airlines and we expect a good final quarter of 2024 financially,” said CEO Luis Gallego.

Second, forecasts for this year look healthy. Currently, City analysts expect revenue to climb 4% and earnings per share (EPS) to rise about 10%. Meanwhile, global airline body IATA is forecasting record passenger numbers across this industry this year. It expects airlines to generate $36.6bn of net profit in 2025 – up $5bn on 2024’s forecast.

The valuation also looks attractive. With the consensus EPS forecast for 2025 sitting at 59.5 euro cents, the price-to-earnings — or P/E — ratio here is only six. That’s lower than many other airline operators’ valuations.

Finally, there’s been quite a bit of bullish broker activity lately. Last month, Jefferies raised its target price to 350p from 270p, while Peel Hunt raised its target price to 400p from 270p. Deutsche Bank also recently upgraded the stock to a Buy rating from a Hold and raised its target price to 400p from 215p.

Can it echo Rolls-Royce’s trajectory?

As for whether the shares can perform like Rolls-Royce (which is up 680% in a little over two years), I’m not convinced.

You see, with airlines, something always seems to go wrong sooner or later. And I expect this to happen here at some stage in the not-too-distant future.

It could be related to geopolitical issues. If conflict in the Middle East escalates, this could lead to routes being cancelled.

Or, it could be related to oil prices. Oil is at relatively low levels right now but it’s unpredictable and could always shoot back up. If it were to spike up to $100 per barrel, IAG’s share price would probably fall as investors worry about fuel prices.

Supply chain/engine challenges are another issue to consider. Recently, airlines around the world have seen their growth hampered by problems at Boeing and Airbus. Meanwhile, IAG has had to cut long-haul flights because of delays in the delivery of engines and parts from Rolls-Royce.

Better shares to buy?

So, I don’t think IAG shares will generate monster returns in the coming years. I believe there could be some further gains on the horizon in the near term but I’m not expecting the shares to double or triple in the years ahead.

I also think there are better shares for long-term investors to consider buying. Airline stocks can be good ‘trades’ at times, but history shows that they tend to be poor long-term investments due to the fact that so much can go wrong.