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Cramer: Spirit Airlines relatively cheap stock

(Click for video linked to a searchable transcript of this Mad Money segment)

"Honestly, at these levels the stock's selling for 15 times earnings despite having a 25% growth rate, and that's super cheap," Cramer said.

The Mad Money host was talking about Spirit Airlines, a stock he first profiled on April 9 as his favorite buy among all stocks that trade between $50 and $100.

On Tuesday shares declined almost 5%, after the company reported earnings, which largely met expectations. "Spirit beat the earnings estimates by a penny and reported in-line revenues, up 18.3% year over year," Cramer explained.

Spirit Airlines
Getty Images
Spirit Airlines

The selloff, Cramer said, was simply a case of Spirit reporting good results when the Street wanted great results.

"I think this is simply a case where Spirit had run up a lot since the last quarter and people were hoping for a huge blowout. Sometimes a company can report a good quarter that still isn't good enough to satisfy the market."

However, the fundamental catalysts facing this airline earlier in the month remain as dynamic now as they did then.

"While the big three airlines are looking for ways to make their passengers pay more, Spirit has achieved business success by charging the lowest fare possible," Cramer explained.

And in an era when travelers have become extremely cost conscious, Spirit's pricing strategy has been embraced with great enthusiasm.

"Spirit has made a bet that cost-conscious consumers simply want to find the cheapest way to fly, and that bet has paid off in a big way," Cramer said.

Business is booming. And Cramer says Spirit is handling that business with great efficiency.

"The company has 55 planes at the moment, but they use those planes more efficiently than the competition, keeping them in the air for 13 hours a day, whereas a Jet Blue only flies its planes for 12 hours a day, and at Southwest that number is less than 11 hours. Also, the company outfits its planes with more seats than the competition, too. On a Spirit Airbus A320 there are 178 seats, versus just 150 seats for Jet Blue on the same model of airplane. True, there's less legroom on a Spirit Airlines flight, however, the revenue potential per flight is greater."

And as efficient as Spirit has been at running their business, Cramer says it's equally important that they're growing their business, too.

"Right now Spirit has just 55 aircraft serving 125 non-stop markets, but the company is growing its fleet aggressively, which means this is an airline with an enormous runway for future growth." Cramer said.

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All told, Cramer believes the story remains in tact.

"If the company can execute on this plan, and I believe it can, then its stock could, well, take off," Cramer said.




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