SNCY

We rate Sun Country Airlines Holdings, Inc. (SNCY) as a Reduce with a composite score of 48.6/100 at a current price of $19.90. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in momentum (63th percentile) and value (47th percentile), which together account for the majority of the composite score. Offsetting weakness in stability (18th percentile) and investment (30th percentile) tempers our overall conviction. We assign a Narrow Moat rating (61/100), High uncertainty, and Poor capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Sun Country Airlines Holdings, Inc. holds a top-quartile position (#0 of 50) within the Transportation, Communications, Electric, Gas, And Sanitary Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 48.6/100 places it at rank #2244 in our full 7,333-stock universe. At $630M in market capitalization, Sun Country Airlines Holdings, Inc. is a small-cap player in the Transportation, Communications, Electric, Gas, And Sanitary Services space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 0% and favorable momentum (63th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 38% (-17.1pp vs sector) narrow to operating margins of 8% (-9.5pp vs sector) and net margins of 3.8%, yielding a gross-to-net conversion rate of 10%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $19.90, Sun Country Airlines Holdings, Inc. is trading near fair value based on current fundamentals. Our value factor score of 47/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 23.2x (a 37% premium to the sector median of 16.9x), EV/EBITDA of 14.9x (at a premium), P/B of 1.7x, P/S of 1.0x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a High uncertainty rating to Sun Country Airlines Holdings, Inc.. Key risk factors include elevated market sensitivity (beta of 2.00), below-average price stability (18th percentile), the combination of leverage (52% D/E) and thin margins (3.8% net) amplifies downside risk. The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 2.00); below-average price stability (18th percentile); the combination of leverage (52% D/E) and thin margins (3.8% net) amplifies downside risk. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 18th percentile and quality factor at the 39th percentile provide a quantitative summary of the overall risk landscape.

We identify limited risk mitigants at this time, which contributes to our high uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate Sun Country Airlines Holdings, Inc.'s capital allocation as Poor. Key concerns include suboptimal returns on capital. Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Sun Country Airlines Holdings, Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Sun Country Airlines Holdings, Inc. receives a Reduce rating with a composite score of 48.6/100 (rank #2244 of 7,333). Our quantitative framework assigns a Narrow Moat (61/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 40/100.

Our analysis does not support a constructive view on Sun Country Airlines Holdings, Inc. at this time. The combination of the current quantitative profile, high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.