Look under Valuation and download the Profitability spreadsheet for Southwest Airlines (LUV) and Continental Airlines (CAL). Find
Question:
Look under “Valuation” and download the “Profitability” spreadsheet for Southwest Airlines (LUV) and Continental Airlines (CAL). Find the ROA (Net ROA), ROE (Net ROE), PE ratio (P/E-High and P/E-low), and the market-to-book ratio (Price/Book-high and Price/Book-low) for each company. Since stock prices change daily, PE and market-to-book ratios are often reported as the highest and lowest values over the year, as is done in this instance. Look at these ratios for both companies over the past five years. Do you notice any trends in these ratios? Which company appears to be operating at a more efficient level based on these four ratios? If you were going to invest in an airline, which one (if either) of these companies would you choose based on this information? Why?
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9780072553079
6th Edition
Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan