Air Canada (OTCMKTS:ACDVF) and Southwest Airlines (NYSE:LUV) are both transportation companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, valuation, dividends, institutional ownership, earnings, risk and analyst recommendations.

Institutional and Insider Ownership

0.1% of Air Canada shares are owned by institutional investors. Comparatively, 82.0% of Southwest Airlines shares are owned by institutional investors. 0.3% of Southwest Airlines shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares Air Canada and Southwest Airlines’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Air Canada $13.94 billion 0.62 $128.84 million N/A N/A
Southwest Airlines $21.97 billion 1.38 $2.47 billion $4.24 13.26

Southwest Airlines has higher revenue and earnings than Air Canada.

Dividends

Southwest Airlines pays an annual dividend of $0.72 per share and has a dividend yield of 1.3%. Air Canada does not pay a dividend. Southwest Airlines pays out 17.0% of its earnings in the form of a dividend. Southwest Airlines has increased its dividend for 7 consecutive years.

Analyst Ratings

This is a summary of current recommendations and price targets for Air Canada and Southwest Airlines, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Air Canada 0 1 4 0 2.80
Southwest Airlines 2 8 6 0 2.25

Air Canada presently has a consensus target price of $32.00, suggesting a potential downside of 1.72%. Southwest Airlines has a consensus target price of $57.09, suggesting a potential upside of 1.53%. Given Southwest Airlines’ higher probable upside, analysts plainly believe Southwest Airlines is more favorable than Air Canada.

Profitability

This table compares Air Canada and Southwest Airlines’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Air Canada 5.85% 22.87% 3.72%
Southwest Airlines 10.73% 24.12% 9.05%

Summary

Southwest Airlines beats Air Canada on 12 of the 15 factors compared between the two stocks.

Air Canada Company Profile

Air Canada provides domestic, U.S. transborder, and international airline services. It offers scheduled passenger services under the Air Canada Vacations and Air Canada Rouge brand name in the Canadian market, the Canada-U.S. transborder market, and in the international market to and from Canada, as well as through capacity purchase agreements on other regional carriers. As of December 31, 2018, the company operated a fleet of 184 aircraft under the Air Canada mainline brand name comprising 91 Boeing and Airbus narrow-body aircraft, 74 Boeing and Airbus wide-body aircraft, and 19 Embraer 190 regional jets; and 53 aircraft under the Air Canada Rouge brand name consisting of 22 Airbus A319 aircraft, 6 Airbus A321 aircraft, and 25 Boeing 767-300 aircraft. It also provides air cargo services in domestic and U.S. transborder routes, as well as on international routes between Canada and markets in Europe, Asia, South America, and Australia. In addition, the company operates, develops, markets, and distributes vacation travel packages in the Caribbean, Mexico, the United States, Europe, Central and South America, South Pacific, Australia, and Asia; and offers cruise packages in North America, Europe, and the Caribbean. Air Canada was founded in 1937 and is based in Saint-Laurent, Canada.

Southwest Airlines Company Profile

Southwest Airlines Co. operates a passenger airline that provides scheduled air transportation services in the United States and near-international markets. As of December 31, 2018, the company operated a total of 750 Boeing 737 aircraft; and served 99 destinations in 40 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as 10 near-international countries, including Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos. It also offers inflight entertainment and connectivity service on Wi-Fi enabled aircraft; and sells points and related services to business partners participating in the Rapid Rewards loyalty program, such as car rental agencies, hotels, restaurants, and retailers. In addition, the company provides a suite of digital platforms to support customers' needs across the travel journey, including Southwest.com, mobile.southwest.com, an iOS app, and an android app; and Swabiz.com, a Website for business customers that offer businesses shared stored company credit cards, company activity reporting, and centralized traveler management services. Southwest Airlines Co. was founded in 1967 and is based in Dallas, Texas.

Receive News & Ratings for Air Canada Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for Air Canada and related companies with MarketBeat.com's FREE daily email newsletter.