Better Aviation Stock Now: Singapore Airlines Ltd or SATS Ltd?

Last week, I had shared some promising trends for the aviation industry and took a look at the business fundamentals of SATS Ltd (SGX: S58) and SIA Engineering Company Ltd (SGX: S59) to see which may be the better aviation-related stock.

SATS turned out to be the company that ticked more of the right boxes for the investing metrics that I was interested in. But since I had left out the elephant-in-the-room when it comes to aviation stocks, the airline company Singapore Airlines Ltd (SGX: C6L), I thought it’d be useful and interesting to see how the firm would compare against SATS.

In my article pitting SATS and SIA Engineering, I had looked at both companies’ (1) cash and debt levels, (2) growth in revenues, profits, and operating cash flow, and (3) price-to-earnings and price-to-sales ratios. The various financial figures were meant to give me insight on the two companies’ financial strength, track record of growth, and valuation.

I’d be comparing Singapore Airlines and SATS using the same set of numbers. And since I had gone through the importance and meaning of the figures in my article on SATS and SIA Engineering, I won’t repeat it again (here’s the article once more). With that, let’s get right to it.

The following table shows how Singapore Airlines’ and SATS’s cash and debt levels look like right now:

Singapore Airlines and SATS balance sheet table
Source: Companies’ earnings report

When it comes to the two companies’ financial strength, there’s a tie – both have cash that are at much higher levels than debt.

Next, we can see how the revenues, profits, and operating cash flows for the two aviation stocks have changed over the last five years in the table just below:

Singapore Airlines and SATS revenue, profit, and operating cash flow table
Source: S&P Global Market Intelligence

SATS is a clear winner here with its superior growth record. Over the timeframe under study, Singapore Airlines has seen its profit and operating cash flow actually shrink at annual rates of 12% and 7%, respectively.

Coming to the last point about valuations, here’s how the two companies stack up:

Singapore Airlines and SATS valuation table
Source: S&P Global Market Intelligence

As you can see, Singapore Airlines is the one with the lower PS ratio but higher PE ratio. But because of SATS’s stronger track record of growth (in revenue, profit, and operating cash flow), I would think that SATS’s higher PS ratio is justified. Thus, on balance, SATS would be the company that has the more reasonable valuation.

A Fool’s take

To sum up the scores, SATS has again emerged victorious with its faster historical growth rates and relatively better valuations. But, as I mentioned in my article comparing SATS and SIA Engineering, this study of various aspects of Singapore Airlines’ and SATS’s business fundamentals should not be taken as the final word on the investing merits of the latter pair. Further research would be required before any investing decision can be made.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn't own shares in any companies mentioned.