Our viewpoint on Mesa Air (USA Stocks:MESA) and Daseke (USA Stocks:DSKE)?

In the world of investing, it's often said that the sky's the limit. However, for Mesa Air Group (MESA), a player in the industrials sector, specifically in the airlines industry, the sky seems to be filled with turbulence. With a market capitalization of just $32.4M and a valuation market value of $0.77, the company's financial health appears to be in a precarious state. The company's profit margin stands at a loss of 24%, and the return on equity is also in the negative territory at 47%. The analyst overall consensus for MESA is a strong sell, indicating a lack of confidence in the stock's potential for growth. Despite these challenges, the company's gross profit stands at $115M, suggesting that there may still be some potential for recovery. Many baby boomers remain indifferent towards the passenger airlines sector. Therefore, our focus will be on Mesa Air Group and Daseke Inc. We plan to analyze the competitive elements of both companies.
Published over six months ago
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Reviewed by Raphi Shpitalnik

Mesa Air Group (MESA) is a key player in the Airlines industry, with a revenue of 498.1M and a book value of 4.89. However, the company's financial health is a concern, with a free cash flow showing a loss of 60.7M and a diluted EPS of -3.04. The company's risk-adjusted performance of -0.01 and a total risk alpha of -1.63 further underscore the financial risk associated with this investment. Despite these challenges, the company has a potential upside of 11.76, suggesting that there may be room for growth if the company can effectively manage its financial risks.

Important Takeaways

Analyzing the basic indicators of Mesa Air and Daseke, one can compare the impact of market volatility on both companies' prices. By combining them in a portfolio, it may be possible to diversify away market risk. Pair trading strategies could be used, such as matching a long position in Daseke with a short position in Mesa Air. For more information, see our pair correlation module. Starting with asset analysis, the asset utilization indicator represents the revenue earned per dollar of a company's reported assets. Mesa Air's asset utilization ratio is 55.43 percent, indicating that the company generates $0.55 for each dollar of assets. An increasing asset utilization ratio suggests that Mesa Air Group is improving efficiency in using its assets for daily operations.
Out of tens of thousands of stocks, funds, and ETFs that trade on global exchanges each represent an individual company which you can analyze using comparative analysis. To determine which one of the two entities, such as Mesa or Sun is a better fit for your portfolio, analyzing a few basic fundamental indicators is a good first step.

How important is Mesa Air's Liquidity

Mesa Air financial leverage refers to using borrowed capital as a funding source to finance Mesa Air Group ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Mesa Air financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Mesa Air's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Mesa Air's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Mesa Air's total debt and its cash.

Correlation Between Mesa and Sun Country Airlines

In general, Stock analysis is a method for investors and traders to make individual buying and selling decisions. Stock correlation analysis is also essential because it can help investors realize that they may not be as diversified as they think. Risk management strategies are usually required to make sure all portfolios are properly aligned against their risk tolerance level. You can consider holding Mesa Air together with similar or unrelated positions with a negative correlation. For example, you can also add Sun Country to your portfolio. If Sun Country is not perfectly correlated to Mesa Air it will diversify some of the market risks out of the positively correlated stocks in your portfolio. However, the disadvantage of this sort of hedging is that it can potentially affect your investment returns throughout market cycles. When Mesa Air, for example, performs excellent and delivers stable returns, the negatively correlated position you locked in as a hedge may drag your returns down.
Are you currently holding both Mesa Air and Sun Country in your portfolio? Please note if you are using this as a pair-trade strategy between Mesa Air and Sun Country, watch out for correlation discrepancy over time. Relying on the historical price correlations and assuming that it will not change may lead to short-term losses. Please check pair correlation details between MESA and SNCY for more information.

Another Deeper Perspective

Revenue is income that a firm generates from business activities such us rendering services or selling goods to customers. It is a crucial part of a business and an essential item when evaluating a company's financial statements. Revenues from a firm's primary business operations can be reported on the income statement as sales revenue, net sales, or simply sales, depending on the industry in which a given company operates.
Revenue is typically recorded when cash or cash equivalents are exchanged for services or goods and can include products or services discounts, promotions, as well as early payments on invoices or services rendered in advance.

Revenue Breakdown

Lets now check Mesa Air revenue. Based on the latest financial disclosure, Mesa Air Group reported 498.06 M of revenue. This is 85.76% lower than that of the Passenger Airlines sector and 96.77% lower than that of the Industrials industry.
The revenue for all United States stocks is 94.72% higher than that of Mesa Air. As for Daseke we see revenue of 1.57 B, which is 89.83% lower than that of the Industrials
Sector
3.5 B
DSKE
1.6 B
MESA498.06 Million8.95
Sector3.5 Billion62.86
DSKE1.57 Billion28.2
As Warren Buffet once said, "Be fearful when others are greedy and greedy when others are fearful." This sentiment rings true when considering the investment opportunities in Mesa Air Group (MESA). Despite the airline industry's challenges, MESA's robust net assets of $898.47M and EBITDA of $23.19M demonstrate its financial resilience. However, with a current ratio of 0.40X and a negative operating margin of 0.15, the company's liquidity and profitability are concerning. Furthermore, the high probability of bankruptcy at 52.03% and a negative EPS estimate for the current year of $1.49 signal potential risks. Therefore, while MESA presents some attractive aspects, investors should approach with caution due to the significant financial risks involved. .

Our Mesa analysis suggests possible reversion in April

Our recent analysis suggests a potential improvement in Mesa Air Group's stock performance come April. The company's Value at Risk (VaR) has decreased to -14.14, indicating a reduced investment risk. This could signal an upcoming positive shift in the stock's performance. Investors should closely monitor Mesa Air Group as it may offer a profitable opportunity next month. Despite its above-average volatility, Mesa Air Group could be a good investment, but as a potential penny stock, it carries inherent risks. Many penny stocks are subject to artificial price hype, so investors must fully understand the potential gains and risks. We advise investors to be wary of signals such as unreported promotions, sudden news releases, or email spam. Also, review the biographies and work history of company officers before investing in high volatility instruments or penny stocks.
While it's possible to profit from these stocks with perfect timing, remember that artificially hyped penny stocks usually can't maintain their increased share price for long. The only sustainable way to increase shareholder value is through solid performance backed by strong fundamentals. In light of the recent 2 percent slip in Mesa Air Group's stock, the investment outlook appears to be quite bearish. The analyst overall consensus labels the stock as a Strong Sell, with the lowest estimated target price standing at $1.82. The valuation hype value and market value are both at 0.77, indicating a potential overvaluation. The real value, however, is estimated to be slightly higher at 1.06. Despite the possible upside price of 9.5, the potential downside risk of 0.0077 should not be overlooked. Given these factors, investors are advised to exercise caution when considering Mesa Air Group for their portfolio. .

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Vlad Skutelnik do not own shares of Mesa Air Group. Please refer to our Terms of Use for any information regarding our disclosure principles.

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