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Dissecting the Numbers for JetBlue Airways Corporation (JBLU) and PPL Corporation (PPL)

JetBlue Airways Corporation (NASDAQ:JBLU) shares are down more than -14.15% this year and recently increased 0.74% or $0.14 to settle at $19.18. PPL Corporation (NYSE:PPL), on the other hand, is down -13.02% year to date as of 05/21/2018. It currently trades at $26.92 and has returned -2.64% during the past week.

JetBlue Airways Corporation (NASDAQ:JBLU) and PPL Corporation (NYSE:PPL) are the two most active stocks in the Regional Airlines industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.

Growth

The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect JBLU to grow earnings at a 13.26% annual rate over the next 5 years. Comparatively, PPL is expected to grow at a 2.14% annual rate. All else equal, JBLU’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. , compared to an EBITDA margin of 52.76% for PPL Corporation (PPL). JBLU’s ROI is 11.10% while PPL has a ROI of 8.10%. The interpretation is that JBLU’s business generates a higher return on investment than PPL’s.

Cash Flow



If there’s one thing investors care more about than earnings, it’s cash flow. JBLU’s free cash flow (“FCF”) per share for the trailing twelve months was +0.90. Comparatively, PPL’s free cash flow per share was -0.66. On a percent-of-sales basis, JBLU’s free cash flow was 4.06% while PPL converted -6.2% of its revenues into cash flow. This means that, for a given level of sales, JBLU is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. JBLU has a current ratio of 0.50 compared to 0.60 for PPL. This means that PPL can more easily cover its most immediate liabilities over the next twelve months. JBLU’s debt-to-equity ratio is 0.24 versus a D/E of 1.96 for PPL. PPL is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

JBLU trades at a forward P/E of 9.13, a P/B of 1.31, and a P/S of 0.86, compared to a forward P/E of 11.03, a P/B of 1.67, and a P/S of 2.47 for PPL. JBLU is the cheaper of the two stocks on an earnings, book value and sales basis. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

Analyst Price Targets and Opinions

Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. JBLU is currently priced at a -16.1% to its one-year price target of 22.86.

Risk and Volatility

Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. JBLU has a beta of 0.58 and PPL’s beta is 0.54. PPL’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment




Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. JBLU has a short ratio of 3.10 compared to a short interest of 2.47 for PPL. This implies that the market is currently less bearish on the outlook for PPL.

Summary

JetBlue Airways Corporation (NASDAQ:JBLU) beats PPL Corporation (NYSE:PPL) on a total of 8 of the 13 factors compared between the two stocks. JBLU is growing fastly, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, JBLU is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, EPD has better sentiment signals based on short interest.

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