Does Air Canada’s (TSE:AC) Past Performance Indicate A Stronger Future?
Understanding Air Canada’s (TSX:AC) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Air Canada is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. See our latest analysis for Air Canada
Did AC’s recent earnings growth beat the long-term trend and the industry?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method allows me to assess different companies in a uniform manner using the most relevant data points. “For Air Canada, its “, most recent bottom-line is CA$1,870.0M, which compared to last year’s level, has escalated by a substantial 99.36%. Given that these figures are relatively myopic, I’ve calculated an annualized five-year figure for AC’s earnings, which stands at CA$235.4M. This shows that, on average, Air Canada has been able to gradually grow its profits over the last few years as well.
How has it been able to do this? Well, let’s take a look at if it is only due to an industry uplift, or if Air Canada has seen some company-specific growth. Over the last couple of years, Air Canada expanded its bottom line faster than revenue by efficiently controlling its costs. This has led to a margin expansion and profitability over time. Scanning growth from a sector-level, the Canadian airlines industry has been growing its average earnings by double-digit 27.54% over the prior year, and 12.52% over the past five. This means that any uplift the industry is deriving benefit from, Air Canada is capable of amplifying this to its advantage.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Air Canada has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Air Canada to get a more holistic view of the stock by looking at:
1. 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.
2. Financial Health: Is AC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
