Air Canada (TSE:AC) is a company with exceptional fundamental characteristics. Upon building up an investment case for a stock, we should look at various aspects. In the case of AC, it
company with a
trading at a great value.
Below, I’ve touched on some key aspects you should know on a high level.
If you’re interested in understanding beyond my high-level commentary,
take a look at the
report on Air Canada here.
Outstanding track record and undervalued
AC delivered a triple-digit bottom-line expansion over the past couple of years, with its most recent earnings level surpassing its average level over the last five years.
The strong earnings growth is reflected in impressive double-digit 56.88% return to shareholders,
which is what investors like to see!
AC’s strong financial health means that all of its upcoming liability payments are able to be met by its current cash and short-term investment holdings.
This suggests prudent control over cash and cost by management,
which is a key determinant of the company’s health.
AC seems to have put its debt to good use, generating operating cash levels of 0.42x total debt in the most recent year. This is also a good indication as to whether debt is properly covered by the company’s cash flows.
AC is currently trading below its true value, which means the market is undervaluing the company’s expected cash flow going forward.
Investors have the opportunity to buy into the stock to reap capital gains, if AC’s projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company.
Also, relative to the rest of its peers with similar levels of earnings, AC’s share price is trading below the group’s average.
This supports the theory that AC is potentially underpriced.
For Air Canada,
I’ve put together
- Future Outlook: What are well-informed industry analysts predicting for AC’s future growth? Take a look at our free research report of analyst consensus for AC’s outlook.
- Dividend Income vs Capital Gains: Does AC return gains to shareholders through reinvesting in itself and growing earnings, or redistribute a decent portion of earnings as dividends? Our historical dividend yield visualization quickly tells you what your can expect from AC as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of AC? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
Discounted cash flow calculation for every stock
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