Contrasting Southwest Airlines (NYSE:LUV) & American Airlines Group (NASDAQ:AAL)

Southwest Airlines (NYSE:LUV) and American Airlines Group (NASDAQ:AAL) are both industrials companies, but which is the superior investment? We will contrast the two companies based on the strength of their earnings, profitability, analyst recommendations, dividends, institutional ownership, valuation and risk.

Volatility and Risk

Southwest Airlines has a beta of 1.23, indicating that its share price is 23% more volatile than the S&P 500. Comparatively, American Airlines Group has a beta of 1.45, indicating that its share price is 45% more volatile than the S&P 500.

Institutional and Insider Ownership

80.8% of Southwest Airlines shares are held by institutional investors. Comparatively, 52.4% of American Airlines Group shares are held by institutional investors. 0.9% of Southwest Airlines shares are held by insiders. Comparatively, 0.7% of American Airlines Group shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Southwest Airlines and American Airlines Group”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Southwest Airlines	$28.06 billion	0.80	$441.00 million	$2.08	22.12
American Airlines Group	$54.63 billion	0.17	$111.00 million	($0.73)	-19.27

Southwest Airlines has higher earnings, but lower revenue than American Airlines Group. American Airlines Group is trading at a lower price-to-earnings ratio than Southwest Airlines, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Southwest Airlines and American Airlines Group, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Southwest Airlines	3	9	11	0	2.35
American Airlines Group	2	10	9	0	2.33

Southwest Airlines presently has a consensus target price of $48.20, indicating a potential upside of 4.76%. American Airlines Group has a consensus target price of $17.28, indicating a potential upside of 22.85%. Given American Airlines Group’s higher probable upside, analysts clearly believe American Airlines Group is more favorable than Southwest Airlines.

Profitability

This table compares Southwest Airlines and American Airlines Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Southwest Airlines	3.34%	18.05%	4.44%
American Airlines Group	-0.79%	-9.11%	-0.38%

Summary

Southwest Airlines beats American Airlines Group on 11 of the 14 factors compared between the two stocks.

About Southwest Airlines

Southwest Airlines Co. is a passenger airline that provides scheduled air transportation in the United States and to destinations in Mexico, Central America and the Caribbean. The company also offers air cargo services and operates the Rapid Rewards loyalty program. Founded in 1967 and beginning flight operations in 1971, Southwest grew from a Texas-based carrier into a major U.S. airline. Its headquarters are in Dallas, Texas. Southwest is led by President and Chief Executive Officer Bob Jordan, who assumed the role in 2022.

About American Airlines Group

American Airlines Group Inc. is a holding company whose principal business is operating a global airline through American Airlines and its regional partners. The company provides scheduled passenger and cargo air transportation, along with related services such as loyalty programs and travel offerings. Its network connects destinations across the United States and serves markets in the Caribbean, Latin America, Europe and the Asia-Pacific region. Regional flights are operated under the American Eagle brand by affiliated carriers.