We find American Airlines to be very undervalued versus Southwest Airlines. Here are the factors we considered:
P/S Ratio
AAL's P/S multiple of 0.3x is
significantly lower than the figure of 2.1x for LUV
Revenue Growth
Over the last twelve months, American Airlines has seen revenues change by -45.8% -
lower than the figure of -43% for Southwest AirlinesIn the twelve-month period before that, revenues for American Airlines had changed by 2.7% -
comparable to the 4.1% change for Southwest Airlines
Operating Margin
American Airlines's operating margin was -29.1% for the most recent twelve-month period, which is
meaningfully lower than Southwest Airlines's operating margin of -17.3%Over the last twelve months, the operating margin for American Airlines changed by -35.6 pp (percentage points) -
worse than the change of -30.8 pp for Southwest AirlinesIn the twelve-month period before that, the operating margin for American Airlines had changed by 0.2 pp -
roughly around the change of -0.5 pp for Southwest Airlines over the same period
American Airlines Southwest Airlines Valuation: Current Market Cap $8.6 Bil $26 Bil Current P/S Multiple 0.3x 2.1xAmerican Airlines significantly lower Revenues: Total Revenue (LTM) $25 Bil $13 Bil LTM Revenue Growth (Current) -46% -43%American Airlines lower LTM Revenue Growth (Year-ago) 2.7% 4.1%Similar for both companies Operating Income/Margin: Operating Income (LTM) $-7.2 Bil $-2.2 Bil Operating Margin (LTM) -29% -17%American Airlines meaningfully lower LTM Margin Change (Current) -35.6 pp -30.8 ppAmerican Airlines worse LTM Margin Change (Year-ago) 0.2 pp -0.5 ppSimilar for both companies
