Bond and Stock Performance Analysis

Lit. Guides
>
Free Essays
>
Business
>
Company Analysis
>
Bond and Stock Performance Analysis: Alaska Air Group
Cite
Print
Share
Bond and Stock Performance Analysis: Alaska Air Group Research Paper
Exclusively available on IvyPanda
Updated: Sep 4th, 2022
Introduction
The present report was commissioned by the Chief Financial Officer of Alaska Air Group to assess the companys current attractiveness to investors. The report provides a detailed analysis of the companys financial leverage, the attractiveness of bonds, and trends in stock prices. The report utilizes quantitative methods to make recommendations on how the company can become more attractive for investors.

We will write a on Bond and Stock Performance Analysis: Alaska Air Group specifically for you
for only $16.05 $11/page

808 certified writers online
Financial Leverage
The present section of the report aims at discussing the level of financial leverage of the Alaska Air Group. Financial leverage is assessed using three financial ratios, including the debt-to-assets (debt) ratio, debt-to-equity ratio, and interest coverage (times interest earned) ratio.

The analysis of Alaska Air Group demonstrated that the level of the companys financial leverage increased drastically in 2020. There are two primary reasons for such a case of events. First, due to low sales associated with the COVID-19 pandemic, the company was forced to increase its long-term debt to finance its current operations. As a result, the debt-to-assets and debt-to-equity ratios increased drastically in 2020. In particular, the debt-to-equity ratio almost doubled in 2020 in comparison with 2019, while the from 0.67 in 2019 to 0.79 in 2020. The changes in these two ratios are visualized in Figure 1 below.

Debt-to-equity and debt-to-assets ratios dynamic.
Figure 1. Debt-to-equity and debt-to-assets ratios dynamic.
Second, the interest coverage negative became negative due to the decrease in revenues, which caused a significant drop in earnings before interest and tax (EBIT). At the same time, an increase in interest payments increased from $63 million in 2019 to $87 million in 2020. The dynamics of this ratio are provided in Figure 2 below.

Interest coverage ratio dynamics.
Figure 2. Interest coverage ratio dynamics.
In summary, the COVID-19 pandemic had a significant negative impact on the companys financial leverage. Such an increase can lead to continuing financial distress in the firm, which may lead to decreased interest from investors. Thus, it is crucial to decrease financial leverage to make investments in Alaska Air Group less risky.

Bonds Analysis
The present section provides a comparative analysis of two bonds issued by Alaska Air Group, including ALK5006757 and ALK5005663. In particular, prices, annual coupon interest payments, current yields, and YTMs are analyzed. The recommendations are provided in considering the results of the analysis.

Calculations
ALK5006757 is a bond issued by Alaska Air Group with a maturity date of 15 August 2025. Its last listed price, according to FINRA (2021), was $1115. ALK5005663 is another bond listed by the company with a maturity date of February 15, 2029. The last listed price of the bond was $1103.2.

Get your 100% original paper on any topic done
in as little as 3 hours
Assuming that the par value of a bond is $1,000 if an investor decides to purchase ALK5006757 on May 3, 2021, it will need to pay the price of $1115 plus the accrued interest for the period between interest payments. Since the last payment was on February 15, 2021, and the interest rate is 8%, the investor will need to pay:

Calculations
Assuming that the par value of the bond is $1,000 and the interest rate is 4.8%, the price of ALK5005663 can be calculated the following way:

Calculations
Assuming that the par value of a bond is $1,000, the annual coupon interest payments can be calculated the following way:

CalculationsCalculations
The current yield can be calculated by dividing the annual coupon payment by bond price. The calculations of current yield rates are provided below:

CalculationsCalculations
The YTM of ALK5006757 is estimated at 5.058%, and YTM for ALK5005663 is 3.259%.

Analysis and Recommendations
The calculations provided in Section 3.1 of the present report provide valuable insights into the performance of Alaska Air Groups stocks. The calculations revealed that if an investor would need to decide between buying the two bonds under analysis, it is recommended that ALK5006757 be purchased. This bond outperforms its counterpart in all the characteristics. In particular, its interest rate is higher by 2.72%; the annual coupon payments of ALK5006757 are higher than that of ALK5005663 by 40%; the YTM of ALK5006757 is currently estimated at 5.058%, while YTM for ALK5005663 is lower by 1.8%. Additionally, it should be considered that ALK5005663 is callable, which implies that there is a chance that its YTM will decrease. Thus, even though the investor will need to pay a slightly higher price for the bond; however, the increased price is worth paying.

However, if an investor is to decide to purchase any bond, it is recommended that other companys stocks are selected. The primary problem is that the Alaska Air Group demonstrates unstable financial performance. In 2020, the companys total sales fell by 60% in comparison with 2019 due to the COVID-19 pandemic. As a result, the company reported a $1,324 million loss in net income in 2020. Ratio analysis demonstrated that, in 2020, Alaska Air Group experienced a significant decline in profitability, efficiency, and returns on investments. However, these changes were not associated with internal factors. As comparative analysis shows, competitors also experienced similar declines. Alaska Air Group adapted to the environment better than JetBlue. At the same time, the adaptation made by Alaska Air Groups management was insufficient to prevent losses short-term.

We will write a custom Research Paper on Bond and Stock Performance Analysis: Alaska Air Group specifically for you!
Get your first paper with 15% OFF
Yahoo Finance (2021) reports that the companys sales may continue to decrease in 2021 due to the third wave of the pandemic. Further reduction of sales and profitability may lead the company to further inability to pay its investors and creditors short-term. Such poor financial performance may even lead the company to bankruptcy, which implies that the bonds will not be repaid. Thus, it is recommended that investors select another company from a different industry, as all airlines in the US and abroad experience a significant decline in growth.

Stock Performance
The present section aims at evaluating the stock performance of Alaska Air Group. First, market ratios will be compared against the companys major competitor, JetBlue, and the industry averages. Second, the recent changes in stock prices will be evaluated to make forecasts about its future changes. Conclusions will be drawn from the analysis.

Market Ratio Analysis
The market ratios of Alaska Air Group are provided in Table 1 below.

Table 1. Market ratio analysis (MorningStar, 2021a; 2021b).

Alaska Air Group JetBlue Airways
2017 2018 2019 2020 2019 2020
Price/Earnings ratio 11.82 9.36 13.77 9.9
Market/Book ratio 2.59 1.98 1.96 1.87 1.11 1.24
Earnings per share 7.8 3.55 6.24 1.92
Dividends per share 1.2 1.28 1.4 0.38
The analysis demonstrates that Alaska Air Groups market performance experienced significant issues. First, it should be noticed that the companys EPS and P/E ratios were negative due to negative net profits of -$1,223 million (Yahoo, 2021). The P/E ratio and the EPS were not included in Table 1, as the company did not report the current number of shares. However, assuming that the number of shares did not change in 2020 (123,279 thousand), EPS will be -9.92 (Yahoo Finance, 2021). Considering that the share price at the end of the 2020 fiscal year was $52, the P/E ratio was -5.24 (Yahoo Finance, 2021). Assuming that the number of shares did not change for JetBlue Airways Inc., its EPS in 2021 was -4.57, while its P/E ratio was -3.18. This implies that JetBlue was outperforming Alaska Airways in 2020 in terms of the P/E ratio and the EPS ratio, which makes Alaska Air Group less attractive for investors, as its stock is overvalued. In terms of the P/E ratio, Alaska Air Group is bad condition compared to the industry average, which demonstrated that the average P/E ratio for the air transport industry was 8.14 (Damodaran, 2021).

Similar conclusions can be drawn from the analysis of the market to book ratio. In 2020, Alaska Air Groups performance in terms of the ratio did not change considerably, reaching 1.87. However, this ratio was significantly higher than that of JetBlue Airlines, which was 1.24. This implies that Alaska Air Groups shares are overvalued more than JetBlues shares. Thus, JetBlue is a more attractive stock.

The dividend per share ratio dropped significantly in 2020 in comparison with the previous years. Between 2017 and 2019, the company paid $1.3 per share annually on average. However, in 2020, the ratio fell to as low as 0.38, which is more than a 70% decline. Since JetBlue does not pay out dividends, it is impossible to compare the companies based on this criterion. However, Alaska Air Groups performance in terms of dividends per share does not add to its stocks attractiveness.

Considering all the information presented above, investors do not receive an adequate return on their investment. Therefore, it is not reasonable to buy the stock according to the ratio analysis.

Not sure if you can write a paper on Bond and Stock Performance Analysis: Alaska Air Group by yourself? We can help you
for only $16.05 $11/page
Stock Price Trends
While using financial ratios can be useful to predict the future performance of a stock, it is also useful to analyze the historical prices of stocks. Figures 3 and 4 below visualize the performance of Alaska Air Group and JetBlue, respectively, based on data from Yahoo Finance (2021).

Alaska Air Groups stock price dynamics with trend analysis.
Figure 3. Alaska Air Groups stock price dynamics with trend analysis.
JetBlues stock price dynamics with trend analysis
Figure 4. JetBlues stock price dynamics with trend analysis.
The analysis of historical data of Alaska Air Groups stock performance demonstrated that the stock price of the company was growing steadily during the past year. In May of 2020, the companys stock price was as low as $30 per share, while today, it is trending at $69. This implies that the companys stock price grew by 230% in a year. It is crucial to acknowledge, however, that JetBlues stock price was also growing steadily during the past year. Thus, some part of the price growth can be attributed to the overall tendency of the market. However, comparing the regression equations demonstrated in Figures 3 and 4, the growth coefficient for Alaska Air Group was higher than that of JetBlues growth. This implies that Alaska Air Groups stock prices were growing faster during the past year. Thus, trend analysis of stock prices demonstrated that investment in Alaska Air Group is possible due to stock price growth. At the same time, investment in Alaska Air Group is favorable in comparison with Inc.

Summary and Recommendations
The analysis provided in the present report demonstrated that Alaska Air Group experiences significant financial problems, which may affect the trust of investors. The decline in sales in 2020 led to the companys inability to pay for its operations, which caused an increase in financial leverage. Additionally, negative net income caused significant problems with EPS, P/E ratio, and dividend growth ratio. Even though its bonds remain attractive, there is a significant doubt that the company will be able to pay out the debt of bonds when it matures. Additionally, while the stock prices are growing, the rebound may be associated with overall market trends. Thus, the company needs to implement the following recommendations to optimize its performance.

The primary concern of Alaska Air Group is to increase its sales. Currently, the 59.4% drop in sales in 2020 is the central problem the company needs to solve. Market research needs to be conducted to assess the needs of potential clients, and every effort should be given to fulfilling these needs.
The company needs to decrease its level of financial leverage to decrease interest expenses. As mentioned in Section 2, the current level of leverage is higher than that of the competitor. The capital can be raised by selling property and equipment, which will improve asset turnover. However, such action may lead to unfavorable outcomes long-term; thus, a risk assessment needs to be conducted.
The company should aim at gradually increasing its dividend payouts to improve attractiveness for the investors.
Reflection
The present project provided an opportunity to assess the attractiveness of bonds and stocks of a company from different sides. Additionally, the assignment helped to acquire a deeper understanding of financial leverage by analyzing leverage ratios. I learned that analysis of stock performance should be approached from two sides, including assessment of historical data and analysis of market ratios. Moreover, I learned that bonds should not be analyzed without analysis of financial performance, as there is a chance that they will not be paid out. I used Excel for creating charts and graphs that reflected trends in financial performance. I also received experience in formatting formal reports to make them look neat and organized. I am sure I will be able to use all this experience in my workplace, as I often need to look for financial data, make relevant calculations in Excel, and create reports for higher management.

References
Alaska Air Group. (2021). Annual report 2020. Web.

Damodaran, A. (2021). PE ratio by sector. Web.

FINRA. (2021). Bonds center. Web.

MorningStar. (2021a). Alaska Air Group Inc. Web.

MorningStar. (2021b). JetBlue Airlines Inc. Web.

Yahoo Finance. (2021). Alaska Air Group Inc. Web.

This research paper on Bond and Stock Performance Analysis: Alaska Air Group was written and submitted by your fellow student. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly.
Removal Request
If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda.
Corporate Social Responsibility: Case of Google
Urban Outfitters Inc. and Tiffany & Co.’s Comparative Analysis
Find free essays, topics
Need a custom Research Paper sample written from scratch by
professional specifically for you?

802 certified writers online

CITE THIS PAPER
Select a referencing style:

COPY TO CLIPBOARD
APA-7
APA-6
Chicago (N-B)
Chicago (A-D)
MLA-9
Harvard
Reference

IvyPanda. (2022, September 4). Bond and Stock Performance Analysis: Alaska Air Group. https://ivypanda.com/essays/bond-and-stock-performance-analysis-alaska-air-group/

Powered by CiteTotal, the best reference maker
MORE RELATED PAPERS
JetBlue Airways: The Story of Success
Jetblue Airways Corporation: Company Analysis
JetBlue Airlines: Internal Business Analysis
Apple Inc.: Company Overview
Innovations and Technologies in Associated British Foods Plc
A Management Report on the Business Environment of Ashtead PLC
Competitive Analysis Online Coffee Shop
Disney Company’s Capital Structure Analysis
3 hours!
We’ll deliver a 100% original paper this fast
Learn More
Paper Details
Reading time 7 min
Type Research Paper
Pages 8
Words 2077
Subjects Business Company Analysis
Language
English
Related Papers
JetBlue Airway Companies Blogging
Jetblue Airway: Management Growth
JetBlue Company Employment Compensations
Jetblue Airline Development Project
JetBlue Company Business Ethics Case
JetBlue Airways Corporation
JetBlue’s Strategy Formulation
Open support chat
Your privacy is extremely important to us. We utilize security vendors that protect and ensure the integrity of our platform while keeping your private information safe.
Contact Us
Phone
USA
+1 (866) 236-7979
Canada
+1 (800) 303-8389
Office
,
, . , , , , , .
Study Hub
Free Essays
Writing Tools
Lit. Guides
Donate a Paper
Q&A
Study Blog
Referencing Guides
Free Textbooks
Tongue Twisters
Company
About Us
Contact
Honor Code
Job Openings
Expert Application
Video Contest
Writing Scholarship
IvyPanda Shop
Legal
Terms and Conditions
Privacy Policy
Cookies Policy
Copyright Principles
DMCA Request
Service Notice
About
This is IvyPanda’s free database of academic paper samples. It contains thousands of paper examples on a wide variety of topics, all donated by helpful students. You can use them for inspiration, an insight into a particular topic, a handy source of reference, or even just as a template of a certain type of paper. The database is updated daily, so anyone can easily find a relevant essay example.

Get Professional Assignment Help Cheaply

Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?

Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.

Why Choose Our Academic Writing Service?

Plagiarism free papers
Timely delivery
Any deadline
Skilled, Experienced Native English Writers
Subject-relevant academic writer
Adherence to paper instructions
Ability to tackle bulk assignments
Reasonable prices
24/7 Customer Support
Get superb grades consistently

Online Academic Help With Different Subjects

Literature

Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.

Finance

Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.

Computer science

Computer science is a tough subject. Fortunately, our computer science experts are up to the match. No need to stress and have sleepless nights. Our academic writers will tackle all your computer science assignments and deliver them on time. Let us handle all your python, java, ruby, JavaScript, php , C+ assignments!

Psychology

While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.

Engineering

Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.

Nursing

In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.

Sociology

Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.

Business

We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!

Statistics

We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.

Law

Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.

What discipline/subjects do you deal in?

We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.

Are your writers competent enough to handle my paper?

Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.

What if I don’t like the paper?

There is a very low likelihood that you won’t like the paper.

Reasons being:

When assigning your order, we match the paper’s discipline with the writer’s field/specialization. Since all our writers are graduates, we match the paper’s subject with the field the writer studied. For instance, if it’s a nursing paper, only a nursing graduate and writer will handle it. Furthermore, all our writers have academic writing experience and top-notch research skills.
We have a quality assurance that reviews the paper before it gets to you. As such, we ensure that you get a paper that meets the required standard and will most definitely make the grade.

In the event that you don’t like your paper:

The writer will revise the paper up to your pleasing. You have unlimited revisions. You simply need to highlight what specifically you don’t like about the paper, and the writer will make the amendments. The paper will be revised until you are satisfied. Revisions are free of charge
We will have a different writer write the paper from scratch.
Last resort, if the above does not work, we will refund your money.

Will the professor find out I didn’t write the paper myself?

Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.

What if the paper is plagiarized?

We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.

When will I get my paper?

You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.

Will anyone find out that I used your services?

We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.

How our Assignment Help Service Works

1. Place an order

You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.

2. Pay for the order

Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.

3. Track the progress

You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.

4. Download the paper

The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.

smile and order essay PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!