JetBlue Airways Corporation (NASDAQ:JBLU) shares are down more than -15.48% this year and recently decreased -0.21% or -$0.04 to settle at $18.95. Hawaiian Holdings, Inc. (NASDAQ:HA), on the other hand, is down -35.96% year to date as of 11/13/2017. It currently trades at $36.50 and has returned 8.96% during the past week.

JetBlue Airways Corporation (NASDAQ:JBLU) and Hawaiian Holdings, Inc. (NASDAQ:HA) are the two most active stocks in the Regional Airlines industry based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.

**Growth**

Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect JBLU to grow earnings at a 0.94% annual rate over the next 5 years. Comparatively, HA is expected to grow at a 0.39% 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 16.14% for Hawaiian Holdings, Inc. (HA). JBLU’s ROI is 15.80% while HA has a ROI of 19.50%. The interpretation is that HA’s business generates a higher return on investment than JBLU’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 -0.05. Comparatively, HA’s free cash flow per share was -2.92. On a percent-of-sales basis, JBLU’s free cash flow was -0.24% while HA converted -6.25% 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**

Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. JBLU has a current ratio of 0.60 compared to 0.90 for HA. This means that HA can more easily cover its most immediate liabilities over the next twelve months. JBLU’s debt-to-equity ratio is 0.30 versus a D/E of 0.60 for HA. HA is therefore the more solvent of the two companies, and has lower financial risk.

**Valuation**

JBLU trades at a forward P/E of 10.12, a P/B of 1.49, and a P/S of 0.90, compared to a forward P/E of 8.35, a P/B of 2.31, and a P/S of 0.73 for HA. JBLU is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S ratio. 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**

Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. JBLU is currently priced at a -18.63% to its one-year price target of 23.29. Comparatively, HA is -17.72% relative to its price target of 44.36. This suggests that JBLU is the better investment over the next year.

The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.70 for JBLU and 2.70 for HA, which implies that analysts are equally bullish on their outlook for the two stocks.

**Risk and Volatility**

No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. JBLU has a beta of 0.65 and HA’s beta is 1.42. JBLU’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 2.96 compared to a short interest of 3.05 for HA. This implies that the market is currently less bearish on the outlook for JBLU.

**Summary**

JetBlue Airways Corporation (NASDAQ:JBLU) beats Hawaiian Holdings, Inc. (NASDAQ:HA) on a total of 8 of the 14 factors compared between the two stocks. JBLU is growing fastly, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. JBLU is more undervalued relative to its price target. Finally, JBLU has better sentiment signals based on short interest.