Republic Airways (OTCMKTS: RJETQ) and Southwest Airlines (NYSE:LUV) are both services companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, dividends, analyst recommendations, valuation and earnings.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Republic Airways and Southwest Airlines, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Republic Airways 0 0 0 0 N/A
Southwest Airlines 0 2 14 0 2.88

Southwest Airlines has a consensus target price of $67.53, indicating a potential upside of 4.38%. Given Southwest Airlines’ higher probable upside, analysts plainly believe Southwest Airlines is more favorable than Republic Airways.

Insider and Institutional Ownership

78.9% of Southwest Airlines shares are held by institutional investors. 0.2% of Southwest Airlines shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Volatility and Risk

Republic Airways has a beta of 3.56, suggesting that its share price is 256% more volatile than the S&P 500. Comparatively, Southwest Airlines has a beta of 1.34, suggesting that its share price is 34% more volatile than the S&P 500.

Profitability

This table compares Republic Airways and Southwest Airlines’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Republic Airways -127.81% -1,049.84% -43.36%
Southwest Airlines 10.12% 24.85% 8.87%

Earnings and Valuation

This table compares Republic Airways and Southwest Airlines’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Republic Airways N/A N/A N/A ($13.48) 0.00
Southwest Airlines $20.43 billion 1.88 $2.24 billion $3.48 18.59

Southwest Airlines has higher revenue and earnings than Republic Airways. Republic Airways is trading at a lower price-to-earnings ratio than Southwest Airlines, indicating that it is currently the more affordable of the two stocks.

Dividends

Southwest Airlines pays an annual dividend of $0.50 per share and has a dividend yield of 0.8%. Republic Airways does not pay a dividend. Southwest Airlines pays out 14.4% of its earnings in the form of a dividend. Southwest Airlines has increased its dividend for 5 consecutive years.

Summary

Southwest Airlines beats Republic Airways on 11 of the 13 factors compared between the two stocks.

About Republic Airways

Republic Airways Holdings Inc. is a holding company. The Company offers scheduled passenger services through its operating air carrier subsidiaries, Shuttle America Corporation (Shuttle) and Republic Airline Inc. (Republic). The Company’s subsidiaries offer scheduled passenger service on approximately 1,090 flights daily to approximately 120 cities in over 40 states and Canada under scheduled passenger service through its fixed-fee code-share agreements with United Continental Holdings, Inc. (United), Delta Air Lines, Inc. (Delta), and American Airlines Group, Inc. (American). The Company provides its partners with fixed-fee regional airline services, operating as United Express, Delta Connection, or American Eagle, including service out of their hubs and focus cities. It provides approximately 550 flights per day as American Eagle. It provides approximately 250 flights per day as Delta Connection. It provides approximately 300 flights per day as United Express.

About Southwest Airlines

Southwest Airlines Co. (Southwest) operates Southwest Airlines, a passenger airline that provides scheduled air transportation in the United States and near-international markets. The Company provides point-to-point service. The Company offers ancillary service offerings, such as Southwest’s EarlyBird Check-In and transportation of pets and unaccompanied minors, in accordance with Southwest’s respective policies. Southwest’s Rapid Rewards frequent flyer program enables program members (Members) to earn points for every dollar spent on Southwest fares. Its Internet Website, Southwest.com, is an avenue for Southwest customers to purchase and manage travel online. As of December 31, 2016, Southwest operated a total of 723 Boeing 737 aircraft and served 101 destinations in 40 states, the District of Columbia, the Commonwealth of Puerto Rico, and eight near-international countries: Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, and Cuba.

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