The Qantas share price is too cheap for me to ignore

The airline has sold off sharply in the last week.

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The Qantas Airways Ltd (ASX: QAN) share price has sold off sharply in August. It opened the month at a high of $6.46 per share before sliding to $5.78 apiece at today's market close.

With the sell-off, Qantas shares are now trading at a price-to-earnings (P/E) ratio of just 6.30 times.

That means we are paying just $6.30 to buy $1 of Qantas' earnings. Comparatively, to buy a dollar of the iShares Core S&P/ASX 200 ETF (ASX: IOZ)'s earnings will cost you $19.

With decent fundamental prospects ahead, Qantas shares could be undervalued compared to their historical performance and industry peers. Let's take a closer look.

Qantas benefits from industry shakeup

The Qantas share price has also gained tailwinds from recent industry developments.

Regional Express Holdings Ltd (ASX: REX) entered voluntary administration last week. The smaller airline will continue to run its regional legs.

REX entering administration has removed a competitor from the domestic market. This could potentially boost Qantas' market share if it plays the right cards.

While the immediate impact on Qantas and the industry at large is not yet known, the long-term benefits of reduced competition could be significant. After all, people still need to travel.

Is the Qantas share price a bargain?

Qantas shares have seen significant volatility over the past few years, especially with the impact of COVID-19.

However, UBS analysts believe the airline is now in a stronger position than before the pandemic. The domestic market is less competitive, the loyalty division is contributing more earnings, and debt is lower, it says.

Qantas is also renewing its fleet, which – despite higher costs – might improve customer experience. You never know if you don't try.

UBS has a buy rating on Qantas shares and a price target of $7.50. With the recent sell-off, the upside potential has widened to 30% at the current share price.

The broker also values the Qantas share price at 6.75 times P/E.

Meanwhile, Morgans rates the airline a buy with a price target of $7.00. The broker forecasts Qantas to deliver its second-largest profit in history, expecting an underlying profit before tax of approximately $2.08 billion for the year.

It sees share buybacks on the horizon as a result of these profits.

Earlier in the year, Goldman set a price target of $8.05 on the airline. Again, the sharp pullback has widened the upside potential to 39% at the time of writing.

Foolish takeaway

With a P/E ratio of just 6.30 times at the time of writing and multiple brokers highlighting its undervaluation, the Qantas share price appears too cheap to ignore.

Industry developments and positive earnings forecasts make up the case for investors. However, there are plenty of risks involved.

As always, conduct your own due diligence and consider speaking to a financial advisor before making any investment decisions.

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