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

Earnings and Valuation

This table compares Allegiant Travel Company and Southwest Airlines Company’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Allegiant Travel Company $1.39 billion 1.63 $431.56 million $11.41 12.13
Southwest Airlines Company $20.48 billion 1.82 $5.01 billion $3.31 18.65

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

Profitability

This table compares Allegiant Travel Company and Southwest Airlines Company’s 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 Company 10.16% 26.75% 9.40%

Institutional and Insider Ownership

83.8% of Allegiant Travel Company shares are owned by institutional investors. Comparatively, 80.6% of Southwest Airlines Company shares are owned by institutional investors. 22.0% of Allegiant Travel Company shares are owned by company insiders. Comparatively, 0.2% of Southwest Airlines Company shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Risk and Volatility

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

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Allegiant Travel Company and Southwest Airlines Company, as reported 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 Company 0 5 11 0 2.69

Allegiant Travel Company currently has a consensus target price of $161.89, indicating a potential upside of 16.93%. Southwest Airlines Company has a consensus target price of $61.24, indicating a potential downside of 0.78%. Given Allegiant Travel Company’s higher possible upside, equities analysts plainly believe Allegiant Travel Company is more favorable than Southwest Airlines Company.

Summary

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

About Allegiant Travel Company

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.

About Southwest Airlines Company

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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