Southwest Airlines Co. (LUV): This Airline Has Always Withstood Economic Storms Well

Competitors

Delta Air Lines, Inc. (NYSE:DAL), founded in 1924, operates in US and internationally through its fleet of approximately 700 aircraft. The stock is currently trading at a P/E multiple of 12.53 times on trailing basis, which is lower than the industry average. It has been on an upward trend and has given its investors a return of more than 50% since December 2012. The EPS growth forecast of the company is higher than the industry peers and therefore the stock is expected to move up more in the time to come.

JetBlue Airways Corporation (NASDAQ:JBLU), founded in 1998, operates in US, Mexico, Latin America and Caribbean through its fleet of 127 Airbus A320 aircraft and 53 EMBRAER 190 aircraft. Its stock has been quite volatile, but has followed an upward trend and has given its investors a return of more than 70% in the last year. It is currently trading at a P/E multiple of 17.9 times on trailing basis, which is higher than the industry average. The company has a very high debt/equity ratio, with comparatively lower liquidity ratio than its competitors. But as the EPS growth forecast for the next five years for the company is quite high, it seems to be a good investment for long term.

Conclusion

There are diverse opinions among the investors regarding the future price movement of the stock. While on one hand, Goldman Sachs reaffirmed their ‘neutral’ rating with a price target of $12.90, on the other hand, Deutsche Bank raised its price target to $15.00-$17.00. The consensus price target is $13.70.

There has always been optimism surrounding the company because of its profit generation ability that stems from its operational efficiency. It also has low debt in its balance sheet in this capital intensive industry, which further suggests a better fundamental forecast. Though the P/E ratio of the company is quite high at 22.62, which is higher than its competitors, but the robust growth forecast of the next five years makes this stock a good investment for long term.

The article This Airline Has Always Withstood Economic Storms Well originally appeared on Fool.com and is written by Sujata Dutta.

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