Avianca Holdings (NYSE: AVH) and LATAM Airlines Group (NYSE:LTM) are both transportation companies, but which is the better business? We will compare the two companies based on the strength of their earnings, risk, institutional ownership, profitability, valuation, analyst recommendations and dividends.

Analyst Recommendations

This is a breakdown of recent ratings for Avianca Holdings and LATAM Airlines Group, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Avianca Holdings 1 3 0 0 1.75
LATAM Airlines Group 1 5 1 0 2.00

Avianca Holdings currently has a consensus target price of $9.00, indicating a potential upside of 8.56%. LATAM Airlines Group has a consensus target price of $10.67, indicating a potential downside of 22.37%. Given Avianca Holdings’ higher probable upside, analysts clearly believe Avianca Holdings is more favorable than LATAM Airlines Group.

Dividends

Avianca Holdings pays an annual dividend of $0.09 per share and has a dividend yield of 1.1%. LATAM Airlines Group pays an annual dividend of $0.02 per share and has a dividend yield of 0.1%. Avianca Holdings pays out 11.8% of its earnings in the form of a dividend. LATAM Airlines Group pays out -199.8% 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.

Valuation & Earnings

This table compares Avianca Holdings and LATAM Airlines Group’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Avianca Holdings $4.33 billion 0.24 $555.92 million $0.76 10.91
LATAM Airlines Group $9.29 billion 0.90 $1.41 billion ($0.01) -1,372.63

LATAM Airlines Group has higher revenue and earnings than Avianca Holdings. LATAM Airlines Group is trading at a lower price-to-earnings ratio than Avianca Holdings, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Avianca Holdings has a beta of 0.85, meaning that its share price is 15% less volatile than the S&P 500. Comparatively, LATAM Airlines Group has a beta of 1.59, meaning that its share price is 59% more volatile than the S&P 500.

Profitability

This table compares Avianca Holdings and LATAM Airlines Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Avianca Holdings 2.20% 13.27% 1.81%
LATAM Airlines Group -0.14% -0.16% -0.03%

Institutional & Insider Ownership

2.8% of Avianca Holdings shares are held by institutional investors. Comparatively, 3.2% of LATAM Airlines Group shares are held by institutional investors. 7.9% of LATAM Airlines Group shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

LATAM Airlines Group beats Avianca Holdings on 9 of the 15 factors compared between the two stocks.

Avianca Holdings Company Profile

Avianca Holdings SA is a Panama-based company engaged, through its subsidiaries, in the provision of air transportation services for passengers and commercial purposes. The Company was originally established as a strategic alliance between Aerovias del Continente Americano SA (AVIANCA) and Grupo TACA Holdings Limited (GTH), and it mainly operates in North, Central and South America, the Caribbean and Europe. In addition, through codeshare agreements, the Company is active in the operation of other international passenger air routes. As of December 31, 2011, the Company owned such subsidiaries as Latin Airways Corporation and LifeMiles Corporation, among others. On December 28, 2012, the merger of subsidiaries Latin Airways Corporation, as absorbing company, with Synergy Ocean Air Colombia SAS and Soac 2 SAS was formalized. On June 18, 2013, the Company received the first out of 15 ATR 72-600, a turbo-propelled aircraft from ATR, a company engaged in regional aircraft.

LATAM Airlines Group Company Profile

LATAM Airlines Group S.A. is a Chile-based company, which is engaged in passenger and cargo air transportation, both in the domestic markets of Chile, Peru, Argentina, Colombia, Ecuador and Brazil and in a developed series of regional and international routes in America, Europe and Oceania. These businesses are performed directly or through its subsidiaries in different countries. It operates through two segments: the air transportation business, and the coalition and loyalty program Multiplus. It Air transport segment corresponds to the route network for air transport. Its segment of loyalty coalition called Multiplus is a frequent flyer programs, which operate as a unilateral system of loyalty that offers a flexible coalition system. As of December 31, 2016, the Company operated a fleet of over 329 aircraft. Its passenger aircraft include Airbus A319-100, Airbus A350-900, Boeing 767-300ER, Boeing 787-8, Boeing 787-9 and Boeing 777-300ER.

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