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In June 2011 I identified Alaska Airlines (NYSE:ALK) as an "Outpreformer In An Underpreforming Industry," and in the past 21 months the market has done the same. Alaska stock is up 85% in that time period, and an astonishing 46% 2013 YTD.

Despite the stock's recent momentum, Alaska may still be significantly undervalued. Below is what keeps shares of Alaska looking attractive at $63 per share or even higher.

Quality

How many airlines have you heard of that are known for exceptional service? Almost none.

Try Googling "Airline Name" + "Reviews," and you will find Alaska takes the cake by a landslide. The company's focus on quality in an industry where customer retention can make or break your airline, is a crucial part of the Alaska bull thesis.

In fact, Alaska has won highest customer satisfaction among traditional carriers for five years in a row.

Flightstats has also given Alaska the No. 1 ranking in the country for "on-time performance" for the past three years.

Alaska's focus on its customer service has had a major impact on its ability to gain market share against competition with much worse repertoires.

Expanding Flights/Market

Air travel is still a luxury for most people in the world, but is slowly becoming the norm. This trend has two major components, the comoditization of air travel and new/expanding airports/destinations.

Alaska is traditionally a west coast airline, but has expanded its services dramatically in recent years. The airline now has flights to almost every major U.S. city. This expansion has also diversified Alaska's customer base, giving more stability to the company's financials.

As Alaska continues to add flights because of rising air travel demand and increased market share, growth will continue.

Rising Estimates/Profitable Growth

Estimates for 2013 EPS are up 2% in the past 90 days, and have continued to trend higher across 2013. For 2014 estimates have jumped 4% in the past 90 days. These rising numbers are a testament to the market's low expectations for Alaska, and the company's expanding growth.

Alaska has grown its bottom every year since 2009, with EPS growing from $1.68 to $4.40, an increase of 162% in just three years.

Unlike most airlines that struggle to maintain any kind of positive or normal EPS trend, Alaska has done so for the past five years. Sustained and growing profitability is really what sets Alaska apart from other American airline companies.

Rock Bottom Valuation

Alaska's P/E based on 2013 estimates is just 11.4x, and drops to 10.0x in 2014. Alaska is responsible for just 3-4% of domestic air travel and therefore has serious room to expand and gain market share.

The company has dramatically reduced debt from $1.9B to just $600M in the past several years.

An improving balance sheet, rising earnings and consistent top line growth, make Alaska a bargain at 11.4x 2013 EPS.

Revenue is set to grow between 5-6% for at least the next two years, and has room to grow at that level for the next five years at least.

A very low P/E ratio gives Alaska shares limited downside at $63. The market is pricing in minimal growth for Alaska going forward, which is the reason for a depressed valuation. If Alaska is able to continue gaining market share with outstanding customer service, the skeptics will be proven wrong once again.

Source: Alaska Airlines Soaring But Still Offers Value