Spirit Airlines (SAVE -2.27%) has taken its investors on a turbulent journey. Shares of the troubled discount airliner have declined 93% in the past five years. During that same stretch, the S&P 500 would have more than doubled your money.

As of this writing, this airline stock is down 97% from its peak, which was established in December 2014. Is it time to take a chance and buy Spirit shares?

Spirit’s troubles are hard to ignore

For a stock to perform this poorly, there are some serious problems with the business. And that’s exactly the case here. This year alone has shined a bright light on Spirit’s troubles.

In January, the company’s proposed merger with JetBlue to create a more powerful discount airline was blocked. Spirit shares tanked after the merger fell through, and are down 83% just this year. If regulators had allowed the transaction to happen, then Spirit’s financial situation could’ve been in better shape due to the combination with JetBlue. Unfortunately, that didn’t occur.

The company’s financial red flags are too hard to ignore now. For one, the business is shrinking. Revenue through the first six months of 2024 of $2.5 billion was down 8.5% year over year. Management calls out overcapacity in the industry that’s putting pressure on fares, as well as price reductions on ancillary services.

Wall Street consensus analysts believe Spirit’s sales will fall 7.2% this year. It looks like the situation will get worse in the near term.

There’s also much to be desired on the profitability front. Spirit has had issues in this regard in the past few years. Its operating loss more than tripled year over year to $360 million in the first half of 2024. Lower fuel costs were more than offset by higher salaries, landing fees, and aircraft rent.

Investors need to understand that Spirit’s financial performance is not indicative of the overall industry. The top U.S.-based air carriers, Delta, Southwest, United, and American, all reported revenue growth and positive operating income in their latest quarters. Spirit sticks out like a sore thumb next to these airlines.

Declining sales and ongoing losses, unsurprisingly, don’t create a favorable recipe for a healthy balance sheet. Spirit is quite literally on the verge of fiscal insolvency, which means there’s a possibility in the not-too-distant future that it will struggle to pay its creditors.

As of June 30, the business had about $7 billion of debt and operating lease liabilities on the books. That’s significantly higher than the balance of cash and cash equivalents of $725 million. This is not a good sign. Spirit will likely need to raise more capital to fund its operations.

Is Spirit stock a value trap?

To be clear, the fact that Spirit has fallen so out of favor with investors means that the stock’s valuation couldn’t be more depressed. It trades at a price-to-sales ratio of under 0.06, which is about the lowest level ever.

That valuation is dirt cheap. And it might entice deep-value investors to take a chance on the stock. The bullish perspective is that revenue may start to stabilize and eventually get back to growth. And that the increasing top line can potentially help get the business to profitability, no matter how small.

But based on recent trends, I’m not confident at all. Spirit was really hoping that its planned merger with JetBlue would’ve gone through to help the business survive. Now, it’s forced to fly solo, which highlights the rough shape the company is in. It’s best to avoid this stock like the plague.