After crash landing in 2016, airline stocks are taking off again. Since mid-February, shares of IndiGo parent InterGlobe Aviation Ltd, Jet Airways (India) Ltd and SpiceJet Ltd have risen between 28% and 68%. Interestingly, the 28% appreciation in IndiGo’s stock pales in comparison with SpiceJet’s spectacular 68% gain during this period. Even the Jet Airways stock has done much better, with a 41% gain.
For starters, analysts say that SpiceJet was trading at a large discount to its bigger rival IndiGo, and that it was unwarranted considering that the former has managed its profit margins better. SpiceJet’s profits have grown in the nine-month period ended December, whereas profits of the other two airlines have fallen. Moreover, on the yields front, too, it has performed comparatively better.
While Jet Airways shares have risen sharply since mid-February, they had underperformed by a huge margin prior to that. As such, it remains the least preferred airline stock in terms of valuation multiples. Read More…