Alaskan Airlines has now taken over Virgin's routes in the United States and you can already start booking your flights on Alaskan through Virgin's website. The combined airline will likely have a lot of cost savings for the airline as well as additional revenue abilities. The services that are going to be offered to passengers will be enough to have the stock really take off.
We determine the current worth of Alaska Air Group using both absolute as well as relative valuation methodologies to arrive at its intrinsic value. In general, an absolute valuation paradigm, as applied to this company, attempts to find the value of Alaska Air Group based exclusively on its
fundamental and basic
technical indicators. By analyzing Alaska Air's
financials, quarterly and monthly indicators, and related drivers such as
dividends, operating cash flow, and various types of growth rates, we attempt to find the most accurate representation of
Alaska Air's intrinsic value. In some cases, mostly for established, large-cap companies, we also incorporate more traditional valuation methods such as dividend discount, discounted cash flow, or asset-based models. As compared to an absolute model, our relative valuation model uses a comparative analysis of Alaska Air. We calculate exposure to Alaska Air's
market risk, different
technical and
fundamental indicators, relevant financial multiples and ratios, and then
comparing them to Alaska Air's related companies.
Alaska Air Group Investment Alerts
Alaska investment alerts and warnings help investors to get more proficient at understanding not only critical technical and fundamental signals but also the significant portfolio-centered indicators. These indicators include beta, alpha, and other risk-related measures that will help you in monitoring Alaska Air Group performance across your portfolios.Please check all
investment alerts for Alaska
Alaska Air Valuation Ratios as Compared to Competition
Our valuation model uses many indicators to compare Alaska value to that of its competitors to determine the firm's financial worth. You can analyze the relationship between different fundamental ratios across Alaska Air competition to find
correlations between indicators driving the intrinsic value of Alaska.
Alaska Air Gross Profit
Alaska Air Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Alaska Air previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Alaska Air Gross Profit growth over the last 10 years. Please check Alaska Air's
gross profit and other
fundamental indicators for more details.
An Additional Perspective On Alaska Air Group
Alaskan Airlines (ALK) has recently merged operations wth Virgin Air. You can now schedule your flight with either of these airlines via their respective websites. The thinking is with the merge is that there would ultimately be cost savings from running just one airline versus two, and, there would be a large amount of additional service to passengers from this. Alaska is predominantly on the West Coast of the United States whereas Virgin is on the East Coast as well as in Europe. Now, given the two combined airlines the company’s revenue should be increased. After all, there will be far more increased services available to the combined carriers. And, since the companies are already flying their planes being able to add more passengers to the same flights will be mostly pure profits. What is more, the price of fuel is still relatively inexpensive. A barrel of oil is still only in the $50s. With costs under control, the potential of larger revenue, there are a lot of reasons to consider this stock.
But, then when you look at the earnings and the price of the stock, you may have even more reasons to buy the stock. Here are the earnings for the past several years:
2011: $3.41
2012: $4.47
2013: $7.26
2014: $4.47
2015: $6.61
There was a drop in the earnings from ’13 - ’14. Other than that these earnings have been increasing year-over-year and are set to do so in 2016. The stock is trading at about $90 per share, whereas the 2016 earnings are looking to come in final around $8.50 per share. That puts the stock at nearly 10-times earnings. I am usually targeting stocks at that level. So, this makes me want to, at the very least, put the company’s stock on my watch list.
The fundamentals are strong for the overall economy in the United States. From that perspective, there is a lot of potential for continued expansion in the airline’s revenue. But, I have to be honest, I was surprised given the fundamentals of the economy and the airline itself, this stock would be priced as cheap as it is. This is not the first airline I have looked at, I evaluated Delta as well, and both airlines were trading at lower ratios. Still, I think the stock has a very strong foundation and can do well going forward.
I have also written that I think overall the stock market is overpriced. The historical average for price-to-earnings is 15. Currently it is sitting at 26. That is way too high and either the stock market needs to come down to more attainable levels or companies are going to have to start earning more. I am doubtful that companies are going to be able to increase earnings at an outpaced level so we will more than likely be seeing the stock market slide down some. As it is there stock market has had a very difficult time getting across the 20,000 level.
Given a potential selling in the stock market putting Alaska Airlines on your watchlist is a prudent move. The stock is trading at nearly 10 times earnings now; it is just slightly above that, and any overall selling in the equity market would only serve as offering a better entry point into a great investment opportunity.
Alaskan is very well positioned for the future as well as very well priced. The combined company is set to increase its revenue over the forthcoming period. And, holding on to this company in your portfolio will prove to be a good move.
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David Taylor is a Senior Member of Macroaxis Editorial Board - Sector Analysis. David is a professional writer who writes for multiple investment news outlets. His primary focus is dynamic movements in financial markets and effects of economic volatility on North American industries and sectors. David has many years of experience in financial service industry including working with major banks as a FX trader. In his free time, he does a lot of outdoors type activities including rock climbing, mountain biking, hiking, mountaineering and kayaking in the summer, and snowboarding in the winter.
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