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Controladora Vuela (VLRS) Hits 52-Week High, Can the Run Continue?

Zacks Equity Research

Shares of Controladora Vuela Compania de Aviacion, S.A.B. de C.V. (VLRS) have been strong performers lately, with the stock up 7.9% over the past month. The stock hit a new 52-week high of $11.42 in the previous session. Controladora Vuela Compania de Aviacion, S.A.B. de C.V. has gained 113.1% since the start of the year compared to the 20.2% move for the Zacks Transportation sector and the 15.3% return for the Zacks Transportation - Airline industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 25, 2019, Controladora Vuela reported EPS of $0.36 versus consensus estimate of $0.34.

For the current fiscal year, Controladora Vuela is expected to post earnings of $1.14 per share on $1.81 billion in revenues. This represents a 425.71% change in EPS on a 26.77% change in revenues. For the next fiscal year, the company is expected to earn $1.06 per share on $2 billion in revenues. This represents a year-over-year change of -7.02% and 10.84%, respectively.

Valuation Metrics

Controladora Vuela may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Controladora Vuela has a Value Score of B. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 10X current fiscal year EPS estimates. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Controladora Vuela currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Controladora Vuela meets the list of requirements. Thus, it seems as though Controladora Vuela shares could have a bit more room to run in the near term.

How Does Controladora Vuela Stack Up to the Competition?

Shares of Controladora Vuela have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Hawaiian Holdings (HA), Ryanair Holdings (RYAAY), and Allegiant Travel (ALGT), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for Controladora Vuela. Still, the fundamentals for Controladora Vuela are promising, and it still has potential despite being at a 52-week high.

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Controladora Vuela Compania de Aviacion, S.A.B. de C.V. (VLRS) : Free Stock Analysis Report
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