Why Alaska Air Group, Inc. Is Both a Top-Rated Airline and a Substantial Growth Investment

Alaska Airlines Group Inc. has been a great investment for stockholders but how does its financial metrics, estimated earnings, valuation, and company operations forecast for future growth?

May 21, 2014 at 6:00PM

As a growth stock, Alaska Air Group, (NYSE:ALK) provides great opportunity for investors as analysts expect it to outperform the market by a considerable amount. Estimates have the stock returning substantial value to stockholders and consumers have marked the airline as one of the top companies in the airline industry based on recent reports.

Exceptional earnings outlook and strong financial metrics
In an industry where stocks have already experienced a 25% investment return in the first quarter of 2014, investors can expect Alaska Air to continue with this trend. Its's expected to return 28.7% earnings-per-share growth for 2014 and has been profiled with an estimated long-term growth of 18%.

With forecasts like that it's hard not to get excited by the potential return that the stock presents. However, it's important to keep in mind the financial metrics that back the potential growth the stock withholds. Most recent SEC filings show strong financial numbers that include a low debt-to-equity ratio of 0.34, a 22.92% return-on-equity, and a current ratio of 1.10.

So not only does the company present great potential growth, it's not risking this growth at the hands of the stockholders because it's providing great financial return as well as backing its liabilities with more than enough equity and assets.

Undervaluation in comparison to the industry
Currently the stock has a P/E ratio of 13.7, versus an industry average of 14.8, and a PEG ratio of 0.7, versus an industry average of 0.8. This comes as a positive sign for considering Alaska Air as an investment at this point because not only is the stock considered undervalued versus the industry based on its P/E ratio, its PEG ratio suggests that the stock expects to return substantial growth at a fairly reasonable value in relation to its price.

A top rated airline by flyers
The airline is managing to return substantial value and growth as a stock, but how is it functioning as a business?

Alaska Air recently ranked as the top airline in J.D Power's survey of over 11,000 flyers for quality and usability of its frequent flier program among North American airlines. This survey was weighed by fees, reservations, check-ins, aircraft, boarding and baggage, and flight crew. Notably, the company also leads major U.S. airlines in on-time performance.

What this means for the company as a business is that it's functioning at a level that consumers find more than acceptable. This should help it retain its current customer base as well as help it attract a larger market share. This in turn will hopefully continue to provide a steady and increasing flow of future revenue which could suggest the reason for the 4.1% increase in traffic in the first quarter of 2014.

In 2013, Alaska Air also ranked number one in fuel efficiency among U.S. airlines by the International Council on Clean Transportation. In an industry where jet fuel is expected to account for $213 billion of costs, it can be reassuring to know that this airline does its best to minimize the cost that cuts the most into the industry's profit.

Overlying picture
The Alaska Air Group seems to function both well as an investment and as a business, which should certainly make it attractive for potential stockholders. However, operating in an industry that is highly competitive you'll have to consider whether it can retain its share of the market, especially if it's forced to raise airfare in the future. Either way, between being ranked as a top performing U.S. airline and planning throughout 2014 to distribute at least $350 million to shareholders through dividends and share repurchases, the company is definitely treating its customers and investors at a very considerate standard.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Jake Gilfix has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers