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Earnings estimates for Republic Airways Holdings Inc. (RJET - Snapshot Report) have increased sharply in the past 30 days, helping the company reach Zacks Rank #1 (Strong Buy) status on January 9, 2013. Moreover, shares have soared since December 31, 2012. A forward P/E multiple of just 5.5 and a P/S multiple as low as 0.1 make Republic Airways an attractive pick for value investors.

A Mixed Q3

On October 31, Republic Airways reported third-quarter earnings per share of 51 cents, outpacing the Zacks Consensus Estimate by 18.6% and the year-ago result by 27.5%. RJET has now surpassed the Zacks Consensus Estimate for five straight quarters with an average surprise of nearly 35%.

However, total revenue of $713.1 million decreased 7.1% year over year and also lagged the Zacks Consensus Estimate.The drop in revenue was primarily due to a $29.3 million decrease in fuel reimbursed under the company’s fixed-free agreements, coupled with lower block hour production. On the other side, the bottom line made a huge jump on effective restructuring efforts completed in 2012.

Climbing Estimate Revisions

The Zacks Consensus Estimate for 2012 has advanced 21.3% to $1.14 over the past 30 days, as all 3 estimates were revised higher. The Zacks Consensus Estimate for 2013 jumped 34.5% to $1.52 in the same time, as 4 of 5 estimates were hoisted. These estimates suggest substantial year-over-year gains of 850% for 2012 and 33.2% for 2013.

Impressive Valuation

The current valuation of Republic Airways looks promising. The company has a current forward P/E multiple of 5.5, a P/S multiple as low as 0.1 and a P/B multiple of just 0.8 (a P/E ratio below 15.0, a P/S ratio below 1.0 and a P/B ratio under 3.0 generally indicate value). These multiples are below the peer group averages, indicating that Republic Airways is undervalued at present.

The company has other solid fundamentals as well, including a PEG ratio of 0.11 and an 89% discount to the benchmark of 1.0 for a fairly valued stock. This implies strong growth potential. Another encouraging multiple is its trailing 12-month ROE of 11.8%, compared with the industry average of 10.1%.

The widening gap between the stock price and earnings estimates for 2013 and 2014 reinforce that Republic Airways is undervalued. The company is likely to sustain its positive trend riding on the back of its growing business opportunities.

Headquartered in Indianapolis, Indiana, Republic Airways Holdings Inc. was founded in 1996. The company operates through its four subsidiaries: Chautauqua Airlines, Frontier Airlines, Republic Airlines and Shuttle America. Republic Airways has a portfolio of over 280 aircraft offering passenger service on nearly 1,500 flights daily to over 145 cities in the U.S., Bahamas, Canada, Costa Rica, Dominican Republic, Jamaica, and Mexico. Republic Airways currently has a market capital of approximately $406.8 million.

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