Morningstar Upgrades Air Canada(AC:TSX) to a Buy rating

STA Research
by: STA Research

Morningstar Upgrades Air Canada to a Buy rating and maintains the target price at $27 on the company’s stock.

Based on the Air Canada stock forecasts from 14 analysts, the average analyst target price for Air Canada is CAD 28.93 over the next 12 months. Air Canada’s average analyst rating is Strong Buy. Stock Target Advisor’s own stock analysis of Air Canada is Bearish, which is based on 2 positive signals and 8 negative signals. At the last closing, Air Canada’s stock price was CAD 20.78Air Canada’s stock price has changed by -4.55% over the past week, +0.73% over the past month and -27.67% over the last year.

What we like:

High market capitalization

This is one of the largest entities in its sector and is among the top quartile. Such companies tend to be more stable.

Positive free cash flow

The company had positive total free cash flow in the most recent four quarters.

What we don’t like:

Poor risk adjusted returns

This company is delivering below median risk adjusted returns in its peers. Even if it is outperforming on returns , the returns are unpredictable. Proceed with caution.

High volatility

The total returns for this company are volatile and above median for its sector over the past 5 years. Make sure you have the risk tolerance for investing in such stock.

Below median dividend returns

The company’s average income yield over the past 5 years has been low compared to its peers. However, it is not a problem if you are not looking for income.

Overpriced compared to earnings

The stock is trading high compared to its peers on a price to earning basis and is above the sector median.

Overpriced compared to book value

The stock is trading high compared to its peers median on a price to book value basis.

Highly leveraged

The company is in the bottom half compared to its sector peers on debt to equity and is highly leveraged. However, do check the news and look at its sector and management statements. Sometimes this is high because the company is trying to grow aggressively.

Negative cashflow

The company had negative total cash flow in the most recent four quarters.

Overpriced on free cash flow basis

The stock is trading high compared to its peers on a price to free cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering to buy.

 

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