Validea’s pick of the week provides a detailed report on a company that scores well in the stock-screening service’s model portfolios. On Validea.ca, investors can analyze 1,000 Canadian stocks through 12 different guru-based models and get individual reports on each company. Globe Investor has a distribution agreement with Validea.ca. Try it.
Low-fare Spirit Airlines currently operates more than 250 daily flights to over 50 destinations within the U.S., Latin America, Caribbean and Canada. It has a market cap of $4.8-billion (U.S.)
Its 12 month relative strength of 90 is one reason it gets some interest from the Motley Fool-based strategy. The Fool strategy also likes that its profit margins are high (11 per cent) and have increased each of past two years.
Spirit Airlines has grown earnings at a 19-per-cent pace over the long term (using an average of the 3-, 4- and 5-year EPS growth rates), part of why the Martin Zweig based model has strong interest. The Zweig model likes that EPS growth has been driven by revenue growth (23 per cent using an average of the 3-, 4- and 5-year sales growth rates). The Zweig-based strategy also likes that its earnings growth is accelerating (52 per cent last quarter, versus 19 per cent long term) and its sales growth is accelerating (23 per cent last quarter versus 18 per cent the previous quarter).
The company has no long term debt, which the Zweig and Fool models love It has a strong 35-per-cent return on capital, using the EBIT/tangible capital employed metric the Joel Greenblatt-based model uses. And its strong 27-per-cent return on equity is three times airline industry average.
John Reese is long SAVE.
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