Allegiant Travel Company (NASDAQ: ALGT) and Southwest Airlines (NYSE:LUV) are both mid-cap transportation companies, but which is the better investment? We will compare the two companies based on the strength of their profitabiliy, valuation, earnings, dividends, institutional ownership, risk and analyst recommendations.

Volatility and Risk

Allegiant Travel Company has a beta of -0.01, suggesting that its stock price is 101% less volatile than the S&P 500. Comparatively, Southwest Airlines has a beta of 1.26, suggesting that its stock price is 26% more volatile than the S&P 500.

Dividends

Allegiant Travel Company pays an annual dividend of $2.80 per share and has a dividend yield of 2.0%. Southwest Airlines pays an annual dividend of $0.50 per share and has a dividend yield of 0.8%. Allegiant Travel Company pays out 24.5% of its earnings in the form of a dividend. Southwest Airlines pays out 15.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Allegiant Travel Company has raised its dividend for 5 consecutive years. Allegiant Travel Company is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares Allegiant Travel Company and Southwest Airlines’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Allegiant Travel Company $1.39 billion 1.67 $431.56 million $11.41 12.42
Southwest Airlines $20.48 billion 1.83 $5.01 billion $3.31 18.71

Southwest Airlines has higher revenue and earnings than Allegiant Travel Company. Allegiant Travel Company is trading at a lower price-to-earnings ratio than Southwest Airlines, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Allegiant Travel Company and Southwest Airlines’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Allegiant Travel Company 13.61% 41.46% 11.82%
Southwest Airlines 7.19% 16.92% 5.98%

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Allegiant Travel Company and Southwest Airlines, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Allegiant Travel Company 1 9 2 0 2.08
Southwest Airlines 0 5 11 0 2.69

Allegiant Travel Company currently has a consensus target price of $161.89, suggesting a potential upside of 14.21%. Southwest Airlines has a consensus target price of $61.24, suggesting a potential downside of 1.10%. Given Allegiant Travel Company’s higher possible upside, research analysts clearly believe Allegiant Travel Company is more favorable than Southwest Airlines.

Institutional & Insider Ownership

83.8% of Allegiant Travel Company shares are owned by institutional investors. Comparatively, 80.6% of Southwest Airlines shares are owned by institutional investors. 21.0% of Allegiant Travel Company shares are owned by company insiders. Comparatively, 0.2% of Southwest Airlines shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

Allegiant Travel Company beats Southwest Airlines on 9 of the 17 factors compared between the two stocks.

Allegiant Travel Company Company Profile

Allegiant Travel Company is a leisure travel company. The Company is focused on providing travel services and products to residents of under-served cities in the United States. It also provides air transportation under fixed fee flying arrangements. The Company’s products and services include scheduled service air transportation, air-related ancillary products and services, third-party ancillary products and services and fixed fee contract air transportation. Its scheduled service air transportation includes scheduled air transportation on limited-frequency non-stop flights between under-served cities and leisure destinations. As of February 1, 2017, its operating fleet consisted of 47 MD-80 aircraft, 34 Airbus A320 series aircraft, and four Boeing 757-200 aircraft, and it was selling travel on 377 routes to 119 cities. The Company’s air-related ancillary products and services include providing unbundled air-related services and products in conjunction with air transportation.

Southwest Airlines Company Profile

Southwest Airlines Co. (Southwest) operates Southwest Airlines, a passenger airline that provides scheduled air transportation in the United States and near-international markets. The Company provides point-to-point service. The Company offers ancillary service offerings, such as Southwest’s EarlyBird Check-In and transportation of pets and unaccompanied minors, in accordance with Southwest’s respective policies. Southwest’s Rapid Rewards frequent flyer program enables program members (Members) to earn points for every dollar spent on Southwest fares. Its Internet Website, Southwest.com, is an avenue for Southwest customers to purchase and manage travel online. As of December 31, 2016, Southwest operated a total of 723 Boeing 737 aircraft and served 101 destinations in 40 states, the District of Columbia, the Commonwealth of Puerto Rico, and eight near-international countries: Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, and Cuba.

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