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SWRAY or LUV: Which Is the Better Value Stock Right Now?

SWRAY vs. LUV: Which Stock Is the Better Value Option?

This story originally appeared on Zacks

Investors interested in stocks from the Transportation - Airline sector have probably already heard of Swire Pacific (SWRAY) and Southwest Airlines (LUV). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

- Zacks

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Swire Pacific has a Zacks Rank of #2 (Buy), while Southwest Airlines has a Zacks Rank of #3 (Hold) right now. This means that SWRAY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

SWRAY currently has a forward P/E ratio of 9.46, while LUV has a forward P/E of 23.22. We also note that SWRAY has a PEG ratio of 0.16. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. LUV currently has a PEG ratio of 3.87.

Another notable valuation metric for SWRAY is its P/B ratio of 0.56. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, LUV has a P/B of 2.58.

Based on these metrics and many more, SWRAY holds a Value grade of B, while LUV has a Value grade of C.

SWRAY sticks out from LUV in both our Zacks Rank and Style Scores models, so value investors will likely feel that SWRAY is the better option right now.

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Swire Pacific Ltd. (SWRAY): Free Stock Analysis Report


Southwest Airlines Co. (LUV): Free Stock Analysis Report


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Zacks Investment Research