Southwest Airlines (NYSE: LUV) and Avianca (NYSE:AVH) are both transportation companies, but which is the better business? We will compare the two companies based on the strength of their valuation, institutional ownership, analyst recommendations, dividends, earnings, profitability and risk.
Volatility and Risk
Southwest Airlines has a beta of 1.14, indicating that its share price is 14% more volatile than the S&P 500. Comparatively, Avianca has a beta of 0.69, indicating that its share price is 31% less volatile than the S&P 500.
This is a summary of current ratings and target prices for Southwest Airlines and Avianca, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Southwest Airlines currently has a consensus price target of $71.00, indicating a potential upside of 28.69%. Avianca has a consensus price target of $10.33, indicating a potential upside of 15.33%. Given Southwest Airlines’ stronger consensus rating and higher probable upside, analysts clearly believe Southwest Airlines is more favorable than Avianca.
Southwest Airlines pays an annual dividend of $0.50 per share and has a dividend yield of 0.9%. Avianca pays an annual dividend of $0.09 per share and has a dividend yield of 1.0%. Southwest Airlines pays out 14.3% of its earnings in the form of a dividend. Avianca pays out 22.5% 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. Southwest Airlines has raised its dividend for 6 consecutive years.
Insider & Institutional Ownership
80.1% of Southwest Airlines shares are held by institutional investors. Comparatively, 1.9% of Avianca shares are held by institutional investors. 0.2% of Southwest Airlines shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.
Earnings and Valuation
This table compares Southwest Airlines and Avianca’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Southwest Airlines||$21.17 billion||1.53||$3.49 billion||$3.50||15.76|
|Avianca||$4.44 billion||0.17||$48.23 million||$0.40||22.40|
Southwest Airlines has higher revenue and earnings than Avianca. Southwest Airlines is trading at a lower price-to-earnings ratio than Avianca, indicating that it is currently the more affordable of the two stocks.
This table compares Southwest Airlines and Avianca’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Southwest Airlines beats Avianca on 15 of the 17 factors compared between the two stocks.
About Southwest Airlines
Southwest Airlines Co. operates a passenger airline that provides scheduled air transportation services in the United States and near-international markets. As of December 31, 2017, the company operated a total of 706 Boeing 737 aircraft; and served 100 destinations in 40 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as 10 near-international countries, including Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, Turks, and Chaos. It also sells frequent flyer points and related services to business partners participating in the Rapid Rewards frequent flyer program, such as car rental agencies, hotels, restaurants, and retailers. In addition, the company offers a suite of digital platforms to support customers needs across the travel journey, including Southwest.com, mobile.southwest.com, an iOS app, an android app, an email subscription service, and push notifications; and Swabiz.com, a Website for business customers that offer businesses shared stored company credit cards, company activity reporting, and centralized traveler management services. Southwest Airlines Co. was founded in 1967 and is based in Dallas, Texas.
Avianca Holdings S.A., through its subsidiaries, provides air transportation services in North America, Central America, the Caribbean, Colombia, South America, and internationally. It offers passenger and cargo air transportation services; and aircraft maintenance, crew training, and other airport services to other carriers, as well as travel-related services to its customers. The company is also involved in ground operations for third?party airlines in airport hubs, and aircraft leasing activities; and operates LifeMiles, a frequent flyer program. As of December 31, 2016, it operated a fleet of 181 aircraft, including 139 jet passenger aircrafts, 30 turboprop passenger aircrafts, and 12 cargo aircrafts. The company was formerly known as AviancaTaca Holding S.A. and changed its name to Avianca Holdings S.A. in March 2013. The company was founded in 1919 and is based in Panama City, Panama. Avianca Holdings S.A. is a subsidiary of Synergy Aerospace Corp.
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