Investors interested in stocks from the Transportation - Airline sector have probably already heard of Allegiant Travel (ALGT) and Frontier Group Holdings (ULCC). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Allegiant Travel is sporting a Zacks Rank of #1 (Strong Buy), while Frontier Group Holdings has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ALGT is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
ALGT currently has a forward P/E ratio of 12.93, while ULCC has a forward P/E of 40.23. We also note that ALGT has a PEG ratio of 0.25. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ULCC currently has a PEG ratio of 0.91.
Another notable valuation metric for ALGT is its P/B ratio of 1.94. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ULCC has a P/B of 2.43.
These metrics, and several others, help ALGT earn a Value grade of A, while ULCC has been given a Value grade of C.
ALGT sticks out from ULCC in both our Zacks Rank and Style Scores models, so value investors will likely feel that ALGT is the better option right now.
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Allegiant Travel Company (ALGT): Free Stock Analysis Report Frontier Group Holdings, Inc. (ULCC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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