Will Spirit Airlines Take Off After the Crash?

There are a number of positives about Spirit Airlines (SAVE) that investors should not ignore despite a massive drop in the company’s stock price this year. In this piece, we will take a look at the various reasons why Spirit Airlines can get better in the long run and what analysts think of the stock.

Positive sentiments

Imperial Capital analyst Bob McAdoo has reiterated an Outperform rating on Spirit Airlines Co. with a price target of $100.00 primarily driven by the superior stock’s performance, generating double-digit growth across EPS, EBITDA and revenue all through the years since 2007.

Moreover, the addition of new aircrafts and markets that includes 26 new nonstop routes starting in 2015 is forecasted to drive extra passenger growth and thus enhanced company’s profitability.

The analysts seems quite positive about the future growth performance of Spirit Airlines mainly due to the company’s continued cost-cutting initiatives and optimized low-cost business model driving notable prospective growth.

Fitch Ratings has issued an Issuer Default Rating (IDR) of 'BB+' for Spirit Airlines with a stable rating outlook and primarily driven by industry-leading low cost structure, notable liquidity, healthy operating leverage and superior operating company margins.

Moreover, the consensus estimate among 16 investment analysts evaluating Spirit Airlines suggests that the company would outperform the market. This consensus estimate is maintained since the investment analyst’s sentiments declined on Feb 25, 2014. The earlier consensus estimate suggested investors to purchase equity into the stock.

A majority of the key investment analysts are extremely positive about the long-term growth prospects of Spirit Airlines and suggests purchasing equity in the stock.


Hence, if we consider the points presented above, investors are advised to purchase equity in Spirit Airlines. Its valuation is also up to the mark with trailing P/E and forward P/E ratios of 16.27 and 11.95, respectively, which are lower than the overvalued industry’s average P/E of 20.09. The PEG ratio of 0.84 depicts healthy company growth and comparable to the industry’s growth average of 0.46. The profit margin of 13.16% seems satisfactory. Importantly, Spirit has a strong balance sheet with significant total cash of $769.32 million against weaker total debt position of $428.65 million, encouraging the company to make future growth investments.

Published on Nov 16, 2015
By Yaggyaseni Mittra

Copyrighted 2020. Content published with author's permission.

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