With Air Canada (TSX:AC) set to report its third quarter earnings tomorrow, investors will be paying close attention to how Canada’s largest airline has performed in terms of profitability compared to its peers.
With expectations that the airline sector will continue to soar (pardon the pun), Air Canada’s positive momentum is something many momentum investors are likely to jump on ahead of an earnings season for airlines which is shaping up to be an interesting one to watch.
Analysts from Paradigm Capital have upgraded Air Canada’s stock prior to its earnings release on the belief that the company remains significantly undervalued when compared to its North American counterparts. On an Enterprise Value to EBITDAR (EV/EBITDAR) multiple of 4.2, Air Canada remains far below its rivals in terms of valuation multiple, with the average EV/EBITDAR multiple in the industry hovering around 5.2x.
Currently trading around the $26 level, expectations that the company’s share price could climb higher than $40 on a multiple basis should Air Canada continue to fill the valuation gap, the company’s Q3 earnings release remains the key catalyst investors will look to for continued growth through the end of fiscal 2017.
I anticipate Air Canada’s key efficiency initiatives I have pointed to in previous articles will continue to support capital appreciation growth for Air Canada, a company which has outperformed the vast majority of its peers on the TSX since the beginning of the year.
Invest wisely, my friends.
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