The airline sector is growing with technology improvements and steady demand. Therefore, I think airline stocks, Gol Linhas Aéreas Inteligentes S.A. (GOL), Copa Holdings, S.A. (CPA), and Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (VLRS) could be worth adding to your watchlists.
According to research presented by Airport Council International (ACI) World and SITA in their Airport IT Insights Survey, airports are investing much more in technology to digitalize operations and provide a more efficient passenger journey through self-service choices.
Also, according to the International Air Transport Association (IATA), revenue passenger kilometers (RPK) increased by 55.5% year over year in February 2023, based on traffic figures from February 2023.
Willie Walsh, IATA’s Director General, said, “Despite the uncertain economic signals, demand for air travel continues to be strong across the globe and particularly in the Asia-Pacific region. The industry is now just about 15% below 2019 levels of demand, and that gap is narrowing each month,”
Furthermore, the global airline market is expected to grow at a CAGR of 3.7% until 2030.
Let’s delve deeper into the fundamentals of the stocks.
Gol Linhas Aéreas Inteligentes S.A. (GOL)
Headquartered in São Paulo, Brazil, GOL provides scheduled and non-scheduled air transportation services for passengers and cargo; and maintenance services for aircrafts and components in Brazil and internationally.
GOL’s forward Price/Sales multiple of 0.15 is 88.9% lower than the industry average of 1.32. Its forward EV/EBITDA multiple of 5.52 is 47.6% lower than the industry average of 10.54.
GOL’s trailing-12-month CAPEX/Sales of 4.01% is 35.6% higher than the industry average of 2.96%. Its trailing-12-month ROTC of 33.45% is 374% higher than the industry average of 7.05%.
GOL’s net operating revenues increased 52.8% year-over-year for the first quarter 2023 to R$4.92 billion ($986.11 million). The company’s passenger transportation increased 50.6a% year-over-year to R$4.53 billion ($909.27 million). Its operating income came in at R$796.50 million ($159.64 million), up 93% year-over-year.
Analysts expect GOL’s revenue to increase 8.4% year-over-year to $4.14 billion in 2024. Its EPS is expected to grow 216.4% year-over-year to $0.86 for the same period. GOL’s shares have gained 3% over the past month to close the last trading session at $2.71.
GOL’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GOL has a B for Growth, Sentiment, and Quality. Within the B-rated Airlines industry, it is ranked #7 out of 27 stocks. Click here for the additional POWR Ratings for Value, Momentum, and Stability for GOL.
Copa Holdings, S.A. (CPA)
Based in Panama City, Panama, CPA provides airline passenger and cargo services. The company offers approximately 204 daily scheduled flights to 69 destinations from its Panama City hub to 29 countries in North, Central, and South America and the Caribbean.
Its forward Price/Cash Flow of 4.28x is 66.5% lower than the industry average of 12.78x, while its forward EVEBITDA multiple of 4.68 is 55.6% lower than the industry average of 10.54.
CPA’s trailing-12-month EBITDA and EBIT margins of 21.72% and 15.19% are 65.5% and 58.9% higher than the industry averages of 13.12% and 9.56%, respectively.
For the fiscal fourth quarter ended December 2022, CPA’s total operating revenues increased 10% sequentially to $890.61 million. Its operating profit came in at $219.66 million, indicating an increase of 52.9% sequentially. CPA’s total passenger revenue came in at $852.29 million, reflecting an increase of 10.1% from the prior quarter.
Street expects CPA’s revenue to increase 13.6% year-over-year to $3.37 billion in 2023. It’s EPS to grow 44.7% year-over-year to $11.95 for the same period. Over the past nine months, the stock has gained 34.9% to close the last trading session at $91.56.
It’s no surprise that CPA has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Growth and Quality and a B for Sentiment. It is ranked #5 in the same industry.
Beyond what is stated above, we’ve also rated CPA for Value, Momentum, and Stability. Get all CPA ratings here.
Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (VLRS)
VLRS is a Mexico-based company engaged in the airline passenger transportation sector. The Company operates as an ultra-low-cost carrier (ULCC). Its activities are divided into two geographical regions: Mexico (national operations), as well as the Unites States and Central America (international operations).
VLRS’ forward Price/Sales multiple of 0.41 is 68.5% lower than the industry average of 1.32. Its forward EV/EBITDA multiple of 4.40 is 58.3% lower than the industry average of 10.54.
VLRS’ trailing-12-month CAPEX/Sales of 14.01x is 373.5% higher than the 2.96x industry average. Its trailing-12-month gross profit margin of 100% is 232.6% higher than the 30.1% industry average.
For the fiscal first quarter ended March 31, 2023, VLRS’ total operating revenues increased 28.9% year-over-year to $731 million. Its passenger revenue came in at $701 million, up 29.3% year-over-year, while its non-passenger revenue came in at $30 million, up 20% year-over-year.
The consensus revenue estimate of $3.58 billion for the year ending 2024 represents a 7.9% increase year-over-year. Its EPS is expected to grow 8% year-over-year to $1.50 in 2024. Over the past six months, the stock has gained 40.1% to close the last trading session at $11.91.
VLRS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #6 in the same industry. It has a B for Growth and Sentiment. To see additional VLRS’ rating for Stability, Value, Momentum, and Quality, click here.
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GOL shares fell $0.07 (-2.58%) in premarket trading Tuesday. Year-to-date, GOL has declined 0.00%, versus a 8.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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