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JetBlue Airways Corporation (JBLU), Allegiant Travel Company (ALGT), Republic Airways Holdings Inc. (RJET): Airline Stocks Soar, But How Much Room Is Left?

Small is beautiful

When economist Schumacher said ‘Small is Beautiful,’ airlines were not on his mind, but the phrase applies perfectly to this sector. Nevada-based leisure travel company Allegiant Travel Company (NASDAQ:ALGT) is among the better picks in the aviation sector. The company operates a fleet of more than 60 aircraft primarily aimed at leisure destinations and small cities. Compared to its commercial counterparts, Allegiant Travel Company (NASDAQ:ALGT)’s business involves a higher degree of seasonality but still works out in its favor, as it is largely free of unprofitable commercial commitments. This is visible in its margins as well. For the latest reporting period ended March 31, the company’s net profit jumped 47 percent to $31.9 million, translating into a margin of 11.7 percent, up from 8.6 percent for the full year 2012. Allegiant Travel Company (NASDAQ:ALGT)’s stock has surged 12.7 percent over the last month but still trades at an attractive forward earnings ratio of 16.7.

Foolish bottom line

If one has to take a fundamental call in the sector, Allegiant Travel Company (NASDAQ:ALGT) and JetBlue Airways Corporation (NASDAQ:JBLU) are among the better plays. Both are strong financially but JetBlue Airways Corporation (NASDAQ:JBLU) appears fully valued for commercial airlines. On the other hand, Republic Airways Holdings Inc. (NASDAQ:RJET) comes with a debt pile and labor issues and thus is best avoided.

The article Airline Stocks Soar, But How Much Room Is Left? originally appeared on Fool.com.

Jacob Wolinsky has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Jacob is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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