Despite oil shocks and air travel disruption, the International Consolidated Airlines Group (LSE:IAG) share price has held up pretty well.

As the owner of several airlines, including British Airways, fuel costs are a big factor for the group Yet this past month it has emerged as a top performer compared to more budget‑focused airlines.

Since mid-March, the shares are up about 11.3%, outperforming rivals like easyJet and Wizz Air. Are investors leaning more towards the major airline operators rather than the ultra‑low‑cost model right now?

Living up to the hype

Financially, IAG appears deserving of attention. Earnings are up 36.5% year on year, and the company’s return on equity (ROE) sits around 49%, which is clearly appealing for investors.

The valuation also looks attractive, allowing lots of breathing room for further growth.

Its price‑to‑earnings (P/E) ratio is about 6.58, and the P/E‑growth (PEG) ratio is just 0.18. I’m sure most analysts would agree that’s surprisingly cheap for a firm with IAG’s profit growth and airline‑hub scale.

I guess that’s why consensus is a Strong Buy, with an average 12‑month target of around 485p — roughly 23% above today’s price.

So it’s a buy?

All good, so far. But not so fast. Strong earnings and a low price are a good start but it’s not all sunshine and roses. The balance sheet’s likely to raise a few eyebrows, with total debt standing at about £12.46bn while current assets are only around £11.36bn.

That’s a highly leveraged firm that could end up in a precarious position if earnings falter.

The group will need to keep generating strong cash flow and stay disciplined on spending if it hopes to stay above water. Especially if the Middle East conflict pushes fuel prices higher and squeezes margins.

On the upside, higher oil prices cut both ways. Yes, higher jet‑fuel costs threaten profits, but demand for long‑haul, premium‑priced routes stays buoyant. With strong, established brands and more business-class exposure, IAG can get away with charging more than low‑cost rivals like Wizz Air or easyJet.

If the war‑related risk keeps the skies more uncertain, the smaller airlines are more likely to take the brunt of the downturn. In the long run, that could help IAG’s relative position.

The bottom line

For long‑term investors, IAG looks reasonably priced and sits in the high‑return cyclical stock region, rather than defensive income.

Strong earnings growth combined with high profitability and an appealing valuation make it worth considering, in my opinion.

Still, investors may need to stomach some short-term volatility from fuel prices and geopolitics. Compared to Wizz Air and easyJet, IAG’s more diversified with higher earnings potential – but it’s still part of a troubled sector. 

So even as a standout in its class, it may be less appealing to investors seeking steady growth from undervalued stocks.

Fortunately, there’s a host of UK shares that look surprisingly cheap right now – and are less exposed to oil price shocks. For instance, 3i Group‘s forward P/E of 4.6 screams value to me, meanwhile its revenue is up 62.8% year on year. Frasers Group‘s in a similar position, with earnings up 53% year on year and a forward P/E of just 6.8.

And that’s just two of the many I’ve been eyeing lately.