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Spirit Airlines (SAVE) has enjoyed a stellar run, with annual revenue and profit growing nearly nine-fold since 2008. However, guidance issued last month rattled investors.

Currently, the stock is down 13% year todate, and is among the worst performers in the aviation space so far this year compared to Hawaiian Holdings (HA) , American Airlines (AAL) and JetBlue (JBLU) .

Despite these worrying numbers, we'd recommend you hold onto the stock. Morgan Stanley may have turned bearish on the sector as a whole, but giving up on Spirit Airlines would be a mistake.

Spirit Airlines overwhelmed fourth-quarter estimates when it delivered earnings per share of 77 cents, beating expectations by 3 cents. Revenue of $578.35 million marked an 11.3% year-over-year rise.

The company, which claims to have the youngest fleet among major U.S. airlines, has one of the lowest cost structures in the airline industry.

Analysts project Spirit Airlines to post an 11.4% revenue jump in the first quarter of 2017 and then accelerate growth to more than 20% in the following quarter.

For the current year, the top line will grow by nearly 19% and this pace should carry on for the following year as well.

Clearly, Spirit Airlines isn't showing any signs of a slowdown. But what's troubling investors is that revenue per available seat mile (RASM) could see a downswing beyond expectations in the first quarter.

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First, this isn't specifically a Spirit issue. American Airlines and Southwest Airlines (LUV) have slashed their first-quarter revenue outlooks, blaming mild weather and other negative factors.

While Spirit Airlines has obviously tempered investor expectations, its unit revenue is on track to increase again next quarter. Spirit is also bringing in profit from certain recently applied changes to its revenue management approach as well as set of non-ticket revenue efforts.

Over the past 12 months, Spirit has laid the foundations for stronger unit revenue growth. We recommend that investors digest the smaller disappointments and consider the larger picture, which is faster growth prospects compared to larger airlines like American.

At a forward price-to-earnings ratio of 11.05 times, Spirit Airlines' shares sell at a bargain compared to its growth prospects. Peers like JetBlue trade at a 10-11 times forward earnings, but offer much-slower EPS growth over the next half a decade.

As air travel demand stabilizes, we expect Spirit Airlines to mount a recovery. Spirit remains a well-managed and growth-focused enterprise. The 12 analysts offering 12-month price forecasts for Spirit Airlines have a median target of $66, indicating a nearly 30% upside if one gets in now.


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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.