Wednesday, August 16, 2017

Undervalued Stock Alert

Alaska Air Group – ALK
Summary: Holding company for Alaska Airlines, Virgin America, Horizon Air. Operate in US, Canada, Mexico, Costa Rica, and Cuba
Price: $83.38/share
EPS: 6.16
Dividend: $1.20/share, 1.41%, ex-div: 8/18/17
Beta: 1.0
P/E Ratio: 13.71x – slightly higher than the industry average (average floats around 11.18)
Market Cap: 10.3B (half of the amount American and United see)
52 week range: 64.19-101.43
  • Ever increasing earnings annually for the last five years
  • Up 6.55% annually averaged over the last 5 years.
  • On track to do the same in 2017 w/ increasing air traffic
Profit Margin and growth:
  • Profit Margin: 11.02% vs competitors that range from 5-10%
  • Earnings Growth: 31.49% over five years which is slightly higher than industry average
  • Revenue Growth: 21.07% vs 10% or lower that is average for industry
Price Target and Why:
  • Price Target: $81/share
  • WHY:
  • Last drop on price was in 2015 where it dropped 12% and then rebounded to 52-week high over following year. Current drop is an almost 18% drop
  • Earnings are solid but the airline industry as a whole has recently seen lower traffic until just recently where it showed new growth. Appears this new growth may rebound the stock once more as earnings for ALK show promising news.
  • Significant price of entry for new competitors
  • Air travel is still the fastest way to travel and no other alternative is in near sight
  • Private jet – ride share may poach higher fare customers but that leaves an economic model for the future.
  • With bigger planes being ordered/moved into current airlines, maximizing space with economy fairs for more bodies makes sense.

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