Valuation Scorecard: Stock Rating D-Negative (3/7/24)-ALASKA AIR GROUP INC (ALK).

As reflected at the current price of $37, what future ALASKA AIR GROUP INC operating performance is the market anticipating? To achieve average annual stock market performance of 9.0% over the next 6 years, ALASKA AIR GROUP INC shares will need to reach $63. To achieve Upper quartile performance, ALASKA AIR GROUP INC’s stock price will need to reach $74 by 2029.

Executive Summary

• Price Target Research identifies ALASKA AIR GROUP INC as having: very low expected growth, low financial strength, very low profitability, and low stability. Growth is a big positive influence on ALASKA AIR GROUP INC’s valuation while Risk Profile is a big negative influence.
• Very low valuation, lagging shareholder returns. Current valuation levels are very low relative to the ALASKA AIR GROUP INC Peer Group. Recent market returns have substantially underperformed the ALASKA AIR GROUP INC Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, ALASKA AIR GROUP INC shares should reach a level of $103 by 2029 — an 18.4% per year total shareholder return. A 2029 stock price of $63 would reflect median performance and a price of $74 would be required to reach upper quartile performance.
• Growth has been ALASKA AIR GROUP INC’s biggest valuation strength. Historical growth has been very high relative to the ALASKA AIR GROUP INC Peer Group and forecasted growth is relatively very low. Revenue Growth, and EPS Growth have been superior. Asset Growth has lagged. ALASKA AIR GROUP INC’s historical income statement growth has been higher than growth in the balance sheet. Revenue growth has exceeded asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity.
• Pretax Margin, Pretax ROA, and Return on Equity are group lagging. These factors have negatively affected market perceptions of ALASKA AIR GROUP INC. The company has high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
• ALASKA AIR GROUP INC’s risk profile is very unfavorable. Overall variability has been very high with very high revenue variability, very high E.P.S. variability, Financial Strength is very low and earnings’ expectations are very low. The debt/capital ratio has declined very significantly.

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