The FTSE 100 has plenty of exciting value stocks. In recent years however, these value stocks have remained undervalued, with limited interest in UK shares from domestic investors, pension funds, and international investors.

Things appear to be changing. Airline operator IAG’s (LSE:IAG) one company that’s had a turbulent few years but has experienced improving sentiment in 2024.

The stock’s up around 7% since the turn of the year, slightly below the FTSE 100’s performance as a whole.

What’s so great about IAG?

IAG’s a leading airline conglomerate — one of Europe’s largest — formed by the merger of British Airways and Iberia. It owns several prominent brands, including Aer Lingus, Vueling, and LEVEL.

It has around 659 aircraft with a further 25 on order. The majority of these are Airbus-built aircraft such as the A320, which I see as a real advantage given the challenges Boeing’s experiencing both in terms of built quality and production delays.

The diversity of its fleet, destinations, and mix of business/leisure travel provides an element of risk mitigation, which I really like. However, this doesn’t allow it to operate as efficiently as Ryanair, for example, which has just one aircraft platform and a low-cost leisure model.

IAG does carry more net debt than its peers at €7.4bn. Leverage is at 1.3x EBITDA, but that’s significantly less than last year demonstrating a positive post-pandemic trajectory.

Cheap as chips

The stock’s currently looking cheap as chips. It trades at 4.4 times forward earnings for 2024, 4.1 times earnings for 2025, and 3.8 times earnings for 2026.

The EV-to-EBITDA ratio, which takes into account debt, also suggests the stock’s undervalued. It’s trading at 3.2 for 2024, 2.9 for 2025, and 2.7 for 2026.

The only negative I can see is that the EV-to-EBITDA ratio puts IAG at a small premium to easyJet which has practically no debt at all.

Nonetheless, they’re both bargain stocks when compared with their US listed peers. Ryanair — which is listed in the US — currently trades around 11 times forward earnings. Likewise, Delta’s at 7.4 times forward earnings.

I appreciate investors can be wary of UK focused stocks if they don’t believe in the UK economy.

However, IAG shares the same skies as Ryanair and Delta. It even pools its resources on certain routes with its US peers, and they share the profits/losses.

The bottom line on IAG

IAG stock’s down 43.7% since the pandemic. This reflects the impact of the pandemic, the surging cost of aviation fuel since Russia’s war in Ukraine, and several other challenges like European air traffic controller strikes.

These remain concerns, but ones that are baked into the share price, in my opinion.

But, equally, these concerns impact Ryanair and other airlines too. I see no outstanding reason for IAG, and easyJet, to be trading at such considerable discounts.

I hold IAG stock and prefer it to easyJet because it’s more diversified. It may well be one of the most undervalued stocks on the index. It’s also trading at a 33% discount to its average share price target.