How Is Spirit Airlines Inc’s (SAVE) Financial Condition?
Out of the three major stock categories based on market capitalization, mid-cap stocks such as Spirit Airlines Inc (NASDAQ:SAVE) with a market capitalization of USD $3.59 Billion are the least popular among investors. But historically they have outperformed the other two categories, delivering a better risk adjusted return. Mid-caps are found to be more volatile than the large-caps but safer than small-caps, largely due to their weaker balance sheet. While even SAVE’s debt-to-equity ratio of 70.4% doesn’t pass my criterion of below the 40% figure, a better opinion should be based after also assessing its current assets and earnings. View our latest analysis for Spirit Airlines
Does Spirit Airlines have enough cash compared to its debt?
Sometimes debt to equity ratio doesn’t represent the true financial strength of the company if it has a sufficient amount of cash. Comparing its current assets with total debt is an easy way to test that.
Does SAVE earn enough to service its debts?
Another metric that an investor should consider is how Spirit Airlines’s earnings stack up against its debt. While both of these figures are taken from income statement, they highlight a key aspect of financial strength: how much a company earns compared to its interest-obligations – can it easily service debt during a downturn?Any company earning more than five times its interest costs is in quite a healthy financial position. In SAVE’s case the interest on debt is well covered by earnings (10.2x coverage).
Spirit Airlines’s debt-to-equity and current-assets to total-debt ratios don’t meet my criteria, but the company’s profits easily cover its interest expense, indicating it’s less likely to experience additional volatility due to its financials.
Now that you know whether you should keep the debt in mind as a risk factor when putting together your investment thesis, I recommend you check out our latest free analysis report on Spirit Airlines to see what are SAVE’s growth prospects and whether it could be considered an undervalued opportunity.
PS. If you are not interested in Spirit Airlines anymore, you can use our free platform to see my list of over 100 other stocks with a high growth potential.