Alaska Air Group Inc. (ALK) — Overvalued With Poor Growth Metrics

Over the last year, Alaska Air logged a negative performance of -23.2%, with a high of $61.55 and a low of $37.2. During this time, the stock trailed the S&P 500 index by -16.0%. As of April 2023, the company's 50-day average price was $45.88. Alaska Air Group, Inc., through its subsidiaries, operated airlines. Based in Seattle, WA, the mid-cap Consumer Discretionary company has 22,922 full time employees. Alaska Air has not offered a regular dividend within the last year.

Shareholders Are Confronted With a Declining EPS Growth Trend:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue $8,781,000 $3,566,000 $6,176,000 $9,646,000
Gross Margins 22.5% -11.6% 21.9% 17.2%
Operating Margins 12.6% -25.9% 10.9% 6.7%
Net Income $769,000 -$1,324,000 $478,000 $58,000
Net Margins 8.76% -37.13% 7.74% 0.6%
Earnings Per Share $6.19 -$10.59 $3.77 $0.45
Diluted Shares 124,289 123,450 126,775 127,465
Free Cash Flow $1,026,000 -$440,000 $738,000 -$253,000
Capital Expenditures -$696,000 -$206,000 -$292,000 -$1,671,000
Net Current Assets -$6,625,000 -$7,052,000 -$6,230,000 -$7,330,000
Current Ratio 0.64 0.93 0.98 0.68
Long Term Debt $1,264,000 $2,357,000 $2,173,000 $1,883,000
Net Debt / EBITDA 0.83 -4.43 1.83 1.56

A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:

Alaska Air has a trailing twelve month P/E ratio of 102.0, compared to an average of 22.33 for the Consumer Discretionary sector. Based on its EPS guidance of $6.89, the company has a forward P/E ratio of 6.7. The compound average growth rate of the company's historical and projected earnings per share is 2.2%. On this basis, the company's PEG ratio is 47.07, which suggests that it is overpriced. On the other hand, the market is potentially undervaluing Alaska Air in terms of its book value because its P/B ratio is 1.4. In comparison, the sector average P/B ratio is 3.12. The company's shares are currently 148.1% above their Graham number.

Alaska Air Has an Average Rating of Buy:

There are 11 analysts covering Alaska Air, with target prices ranging from $54.0 to $71.0 per share, for an average of $62.05. As of April 2023, the company is trading -26.1% away from its average target price, implying there is an analyst consensus of strong upside potential. On average, analysts recommend to buy Alaska Air.

With a 3.4% short interest, Alaska Air has an average amount of shares sold short. Institutions own 83.3% of the company's shares, and it has a small amount of insider investors because 0.3% are owned by corporate insiders. Overall, the company's top shareholder is the Vanguard Group, Inc., whose 11% stake in the company is worth $629,214,732.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.