The Qantas Airways Ltd (ASX: QAN) share price has been an excellent performer in the last 12 months, rising by approximately 70%, as the chart below indicates. That compares to a rise of just 11% for the S&P/ASX 200 Index (ASX: XJO). Can this outperformance continue? Or have Qantas shares flown too high?

The ASX travel share was hammered during COVID, with both its profit and reputation taking a hit. However, the company appears to have done a number of things to help turn that situation around, including improving its operational performance, launching additional initiatives through its Qantas loyalty and frequent flyer segments, and successfully maintaining higher profit margins than some investors may have expected.

Let's look at some of the reasons that could justify Qantas' current share price valuation and possibly send it even higher.

Everything going the airline's way

The last price-sensitive update we heard from Qantas was announced in late October 2024. The airline announced that both Qantas and Jetstar were seeing "stable demand" in their segments. Considering the high level of travel demand seen in 2024, the fact that demand is still stable is a real positive for the airline stock.

The ASX travel stock also said Jetstar's domestic unit revenue was outperforming previous expectations due to stronger-than-expected travel demand. The airline said Qantas' load factors and demand for corporate travel "continue to improve year on year".

Qantas revealed that domestic revenue per available seat kilometre (RASK) is expected to increase between 3% to 5% in the first half of FY25 compared to the first half of FY24.

The Qantas loyalty division is still expected to grow underlying operating profit (EBIT) by at least 10% in FY25, which is an increasingly important division for the company as a whole.

Energy prices have pleasingly fallen from the highs seen in 2022, just after the Russian invasion of Ukraine, though any significant geopolitical changes could increase or decrease the company's fuel costs.

With all those positives, it's no wonder the Qantas share price has climbed so much in recent months.

Why I'm cautious on Qantas shares

The airline has performed exceptionally well, but its valuation has risen significantly.

I believe its price-to-earnings (P/E) ratio was probably too low in 2024 amid the ongoing strong earnings environment and resilient travel demand, but today's much higher valuation has reduced the potential for good returns in the shorter term.

According to the UBS forecast, the Qantas share price is now trading at 9x FY25's estimated earnings.

Its profit is currently forecast to rise in the single digits (in percentage terms) between FY26 to FY29, but that's not guaranteed to happen.

Fuel prices could rise, increasing competition could hamper margins, and travel demand may not always be as strong. Plus, Qantas needs to invest significant sums in fleet renewal to replace an ageing fleet.

While it's possible Qantas shares could continue rising, I'm not calling the stock a good buy today.