After appreciating by nearly 70% year-to-date, investors are now considering whether an investment in Canada’s largest airline Air Canada (TSX:AC) is a worthwhile investment. Given the fact the airline has continued to grow earnings at an impressive rate, with a valuation multiple among the lowest of its peers, the general consensus is that while value may continue to exist with Air Canada, most of the potential upside in the Canadian airline may already be baked in.
Here’s why I don’t believe this is the case.
The airline industry is one which many iconic investors and analysts have generally pointed to as one which is poisoned, or at a minimum, set up for disaster. Indeed, over the years, countless airlines have battled high levels of debt and bankruptcy protection or restructuring for more often than those periods of high levels of profitability investors search for.
As it turns out, the airline industry in North America is currently on an impressive rally, one which appears to have legs. With Air Canada experiencing a relatively unheard of rally in recent years, investors who may be hesitant to bet on Air Canada to continue to break out due to the company’s track record of mismanagement and heavy losses, the rally has continued despite these investor concerns.
The ability of Air Canada to continue its upward rise remains likely, given the fact Air Canada shares continue to trade at a significant discount to its peers. I expect medium to long-term outperformance accordingly.
Invest wisely, my friends.
