Is Singapore Airlines’ Stock Worth Buying?
Despite the growing competition in the airline industry, Singapore Airlines’ stock has been performing well and continues to rise in value. The company’s strong fleet, new technology, and service innovation have helped it outperform its competitors over the past few years. Is Singapore Airlines’ stock worth buying? Let’s take a look at some of the factors you should consider before making your decision, then decide for yourself if Singapore Airlines’ stock is worth buying or not.
Singapore Airlines is the national carrier of Singapore and one of Asia’s largest airlines. It is also a four-star airline and is considered one of the most efficient in the world. But before buying a share, investors should know how the airline makes money.
It has two primary sources of revenue:
frequent flyer mile earnings and ancillary revenue from related services. Earnings from these sources accounted for about 80% of total revenue in FY 2013/14, or $4 billion out of $5.2 billion, according to data compiled by Bloomberg News.
The Case for Buying
Singapore Airlines offers solid, high-quality products and is one of the cheapest airlines to fly on in the world. They make up for the low ticket prices by charging more for food and baggage. Their hub cities are located in several spots around Asia, so they have a lot of flight routes that fly there, which will make it easier to get where you need to go if you buy their stocks. One negative thing about them is that they’re struggling with some labor strikes right now and have canceled a lot of flights. On top of that, they haven’t been investing much in replacing older aircraft or increasing how many aircraft they have.
The Case Against Buying
Singapore Air’s (SGX: SIA) stock is one of the most attractive in the aviation industry due to its competitive market position, broad route network, and sizable fleet. At SGD2.30 per share, it trades at a price-to-earnings ratio of 9.5x, which is an excellent value for an internationally diversified company trading at just three times its book value. In light of robust expectations for continued strong international growth and rapid expansion in emerging markets like China and India, SGX: SIA is a highly attractive option for both long-term investors as well as traders who want to tap into one of the fastest-growing airlines in the world.
Some Final Thoughts
While both of these companies are considered some of the most stable businesses, SIA’s stocks are currently performing better than MAS. If you’re looking for a safe investment, MAS might be your best bet. That being said, if you have more risk tolerance and want to play the stock market game, then invest in SIA stocks. In either case, it may be worth waiting a few months before making any financial decisions to see how SIA’s new restructuring plan pans out.
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