Analysis of JetBlue

JetBlue is one of the smaller airlines in the industry and is dwarfed by the competition, but remains undervalued relative to its peers.

JetBlue has many avenues of growth available to it that should combine to exert upward pressure on the stock price.

Jet Blue's strong customer loyalty and customer relations will help it strengthen and grow its position within the industry.

Company	JetBlue (JBLU)	Delta Air Lines (DAL)	American Airlines (NASDAQ:AAL)	Southwest (NYSE:LUV)	United Continental (UAL)
Market Cap	6.516B	34.04B	21.79B	31.21B	18.85B
P/E	10.1	9.3	10.9	15.7	8.7
PEG	1.2	2.5	N/A	2.6	3.6
P/B	1.6	2.5	5.8	3.6	2.1
P/S	1	0.9	0.6	1.5	0.5
P/Cash Flow	4.5	7.5	4	8.1	5
Operating Margin	16.90%	15.20%	10.50%	16.50%	11.50%
FCF yield	6.20%	3.80%	N/A	5.30%	2.90%
FCF/sales	5.93%	3.26%	-0.57%	7.98%	1.48%
Debt to equity	0.26	0.59	6.06	0.34	1.31

JetBlue's Fundamentals

Comparing JetBlue’s fundamentals with industry heavyweights gives an interesting look at the company. Even though it is almost three times smaller by market cap than its closest competitor on the list, it does appear to be undervalued.

P/E, P/B, and PEG: JetBlue has a similar PE to the other companies, but its PEG is half that of the closest competitor (Delta). Other metrics that indicate JetBlue is undervalued are its PB, which is the lowest out of these five companies, and its P/CashFlow, which is just above that of American Airlines, but lower than that of the other three.

Operating margin, and debt load: Its operating margin is the highest of all five companies, and higher by a wide margin over AAL and UAL. JetBlue carries a lower relative debt load than its competition which should allow it to continue to develop without being concerned about its debt load weighing it down.

Free cash flow: Its FCF yield is the highest in the group, and its FCF/Sales is the second-highest. These two leading fundamentals indicate that JetBlue has been able to generate free cash flow at a strong pace which bodes well for it being able to grow and expand.

Year	2012	2013	2014	2015	2016
Revenue (USD millions)	4,982	5,441	5,817	6,416	6,632
Growth	N/A	9.20%	6.90%	10.30%	3.40%

Revenue Analysis

JetBlue's revenue has been on an upward trend since 2012. Since then, JetBlue has seen revenue rise to a total of 6632 million in 2016. JetBlue has not been slowing down as Q2 2017 results indicate. In Q2, JetBlue saw an increase of 12.1% in revenue over revenue earned in Q2 of 2016. JetBlue has been able to grow this revenue for a few reasons that will continue to be viable options for the company well into the future.

Cutting Cost (Cost Leadership) and Customer loyalty

JetBlue came in first in Brand Keys' Customer Loyalty Engagement Index, ahead of Delta and United. The reason is because JetBlue's reward program is top-notch.

Competition

The biggest risk to JetBlue is the fact that it is only a fraction of the size of the other major US based airlines. This means that it is at a disadvantage in resources, number of flights offered, and other important areas of the industry.

Conclusion:

JetBlue is a small player in the industry; however, it has other strong prospects which makes it a BUY.