Southwest Airlines vs Spirit Airlines Which Should You Buy?

Southwest Airlines and Spirit Airlines are two major players in the airline industry, each with their own unique characteristics and strengths. Southwest Airlines, known for its low fares and excellent customer service, has been a consistent performer in the stock market. On the other hand, Spirit Airlines, with its ultra-low-cost model, appeals to budget-conscious travelers. Both airlines have faced challenges, like rising fuel costs and competition, but their stocks continue to be closely watched by investors for potential growth opportunities in the dynamic aviation sector.

Southwest Airlines or Spirit Airlines?

When comparing Southwest Airlines and Spirit Airlines, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between Southwest Airlines and Spirit Airlines.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. Southwest Airlines has a dividend yield of 2.76%, while Spirit Airlines has a dividend yield of 11.76%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. Southwest Airlines reports a 5-year dividend growth of 0.00% year and a payout ratio of -897.92%. On the other hand, Spirit Airlines reports a 5-year dividend growth of 0.00% year and a payout ratio of 0.00%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with Southwest Airlines P/E ratio at -406.76 and Spirit Airlines's P/E ratio at -0.55. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. Southwest Airlines P/B ratio is 1.88 while Spirit Airlines's P/B ratio is 0.46.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, Southwest Airlines has seen a 5-year revenue growth of 0.14%, while Spirit Airlines's is 0.01%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with Southwest Airlines's ROE at -0.46% and Spirit Airlines's ROE at -63.51%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $31.73 for Southwest Airlines and $2.67 for Spirit Airlines. Over the past year, Southwest Airlines's prices ranged from $22.58 to $35.18, with a yearly change of 55.80%. Spirit Airlines's prices fluctuated between $1.40 and $17.02, with a yearly change of 1115.71%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.