SkyWest, Inc. (SKYW), a Saint George, UT-based airline company, looks highly attractive from a valuation standpoint. With a forward price-to-sales (P/S) ratio of 0.98, UAL stock trades at a significant discount to industry levels. 

SKYW P/S Ratio (Forward 12 Months) Vs. Industry

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SKYW has a Value Score of B.

Now, the question is whether it is worth buying the stock at current prices. Let us delve deeper to find out.

Let’s delve deeper.

Tailwinds Working in Favor of SKYW Stock

SkyWest's top line benefits from flying contract rate increases. As of Dec. 31, 2024, SkyWest had cumulative deferred revenues of $322 million under its flying contracts. Revenues from flying agreements (contributing 96.7% to the top line) grew 20.4% year over year in 2024. The airline carried 9.7% more passengers in 2024 on a year-over-year basis. Departures increased 10.8% on a year-over-year basis.

SkyWest's fleet modernization efforts to cater to the improvement in travel demand are commendable. In a bid to modernize its fleet, SKYW has fleet-related agreements with airline heavyweights like United Airlines UAL and Alaska Airlines ALK. SKYW will be delivering eight more E175s each in 2025 and 2026. United Airlines is scheduled to deliver seven E175 planes in 2025 and eight in 2026. Alaska Airlines is scheduled to deliver one E175 in 2025. By 2026-end, SkyWest is scheduled to operate 278 E175 aircraft.

In February 2024, SkyWest announced that it had acquired a 25% ownership stake in Contour Airlines, a regional carrier. Concurrent with its third-quarter 2024 results, SkyWest also announced that it had inked a deal with United Airlines to place 40 CRJ550s under a multi-year contract. Concurrent with its fourth-quarter 2024 results, SkyWest also announced that it had inked a multi-year contract extension with American Airlines AAL, which would allow for a total of 74 CRJ700s under the agreement.

We are impressed by SKYW's efforts to reward its shareholders through buybacks. Per its previously announced share repurchase program authorized by SKYW’s board of directors in May 2023, SKYW repurchased 47,000 shares of common stock for $4.9 million during the fourth quarter of 2024. As of Dec. 31, 2024, SkyWest had $48 million available under its current share repurchase program. Buybacks not only reduce the total outstanding share count, thereby increasing earnings per share but also signal management's belief in the intrinsic value of the stock.

The positive sentiment surrounding SKYW stock is evident from the fact that the Zacks Consensus Estimate for the first and second quarter of 2025, as well as full-year 2025 earnings, has been revised upward in the past 90 days.

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Moreover, the consensus mark for the first and second quarter of 2025 and the full-year 2025 implies growth of 38.6%, 22.5% and 15.9% from the respective 2024 figures.

SKYW Stock Price Performance

SkyWest has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 16.71%. Driven by this upbeat earnings performance and the positives mentioned above, SKYW shares have gained 35.1% over the past year, outperforming the Zacks Airline industry.

SKYW Stock One-Year Price Comparison

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How Should Investors Approach SKYW Stock?

It is understood that SKYW stock is attractively valued, and an increase in flying contracts is contributing to SKYW’s top line. Fleet modernization techniquesand consistent shareholder-friendly initiatives act as other tailwinds. We believe that the positives surrounding the stock (as highlighted throughout the write-up) outweigh the concerns regarding escalating operating expenses and debt-laden balance sheets. We, therefore, suggest investors add SKYW stock to their portfolios for healthy returns. The company’s Zacks Rank #1 (Strong Buy) further supports our thesis.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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