How Do Air Canada’s (TSX: AC) Stock Fundamentals Look Right Now?

(Feature Image source:: Air Canada)

Summary

• Air Canada stocks are trending at around C$ 16 after losing over 66 percent of its value this year.
• The carrier’s revenue dropped sharply by 89 per cent to C$ 527 million in the second fiscal quarter of 2020.
• The latest financial quarter results have once again given rise to bankruptcy fears.
• Faced with bleak reality of diminished air traffic and strict travel restrictions amid pandemic, the airline has been scrambling for a break.
• The airline has resorted to tough measures to optimize performance and financial statements including laying off staff and reducing seating capacity.

How far will Air Canada (TSX:AC) stocks plunge? Has the stock bottomed out or there’s more to come? Investors have been on the edge since the dramatic share price erosion of Canada’s largest airline amid pandemic-led recession and flight restrictions.

Air Canada stocks are currently trending at a little over C$ 16 after losing over 66 percent of its value this year. In contrast, the broader Toronto Stock Exchange index is on the recovery path and currently down by 2.68%.

Faced with a bleak reality of diminished air traffic and strict travel restrictions due to pandemic, the airline has been scrambling for a break, repeatedly requesting the federal government to loosen quarantine measures for the aviation industry. A second wave of corona cases could further sink Air Canada’s scrips even with unprecedented support from financial institutions.

In these critical junctures, investors need to figure out if Air Canada’s stock fundamentals make sense anymore.

Air Canada Stock Fundamentals

Air Canada stocks had a momentous run up between 2012 to 2020. After filing for bankruptcy during the SARS epidemic in 2002-03, the carrier turned around things to emerge among the best performing stocks of 2019. Between 14 January 2012 to 14 January 2020, the scrips yielded massive 4800+ per cent returns. Since 14 January, the stock prices nosedived and has been trading in red.

Read: At stock price of C$ 16, is Air Canada a good buy?

To understand Air Canada’s stock position, let us breakdown the airline’s fundamentals:

Air Canada Share Statistics

Listed Shares Outstanding: 296,703,625

Total Shares (All Classes): 296,353,172

Volume: 2,369,172

10 Day Average Volume: 4,216,150

30 Day Average Volume: 4,334,536

Air Canada Price Metrics

Current Price: C$ 16.39

52 Week High: C$ 52.71

52 Week Low: C$ 9.26

Volume Weighted Average Price (VWAP): 16.135

Beta: 1.9562

Alpha: 0.01

Air Canada Moving Averages

21 Day Moving Average: C$ 16.27

50 Day Moving Average: C$ 16.99

200 Day Moving Average: C$ 29.99

Air Canada Dividends

Air Canada does not pay dividends.

Air Canada Valuation Metrics

Market Capitalization: 4,800,664,653 (C$ 4.8 billion)

Earnings Per Share: (minus) -7.48

Price-To-Book (P/B) Ratio: 2.348

Price-To-Cash Flow (P/CF) Ratio: 18.30

Debt-To-Equity (D/E) Ratio: 2.06

Return On Equity*: (minus) - 74.43 %

Return On Assets*: (minus) - 7.06 %

Return on Invested Capital*: (minus) - 4.22 %

Enterprise Value-To-Revenue (EV/R) *: 0.69

Enterprise Value/ EBITDA*: 7.43

Total Debt/ EBITDA*: 10.34

EBITDA/ Interest Expense*: 2.66

EBIT/ Interest Expense*: (minus) -1.31

Free Operating Cash Flow (FOCF) Yield*: (minus) -18.68

Air Canada Stock Price Returns (Percentage Change)

One Week: (minus) -5.27 %

One Month: (minus) -4.65 %

Three Months: (minus) -4.71 %

Six Months: (minus) -63.6 %

Nine Months: (minus) -67.28%

One Year: (minus) -63.4 %

Week-To-Date: (minus) -3.97 %

Month-To-Date: 7.08 %

Quarter-To-Date: (minus) -4.54 %

Year-To-Date: (minus) -66.64 %

*Last Twelve Months, as on June 30, 2002

(Data Source: TSX & EODHD/Others, Thomson Reuters)

Air Canada Financials

Air Canada’s revenue sharply dropped by 89 per cent to C$ 527 million in the second fiscal quarter of 2020 from C$ 4.738 billion in same period last year. The carrier reported an operating loss of C$ 1.555 billion in Q2 FY20, in contrast to an operating income of C$ 422 million in the same quarter last year.

Air Canada Outlook

The national carrier reported 96 per cent year-over-year drop in passengers carried in the second fiscal quarter of 2020. The airline has also suspended operations on 30 domestic regional routes and closed eight regional stations.

Air Canada resorted to tough measures to optimize financial statements such as laying off over 50 per cent of staff or approximately 20,000 employees, permanently retiring 79 aircrafts and reduced seating capacity by 92 per cent.

Meanwhile to increase sales, the carrier tweaked and relaunched its Aeroplan Loyalty program with several key features such as no carrier surcharge, sharing loyalty points among family and friends, seat booking on Air Canada flights using loyalty points, etc.

Despite all these measures, Air Canada also doesn’t expect its revenues to reach pre-pandemic levels till 2023.

Its latest financial quarter results have once again given rise to bankruptcy fears.

While some analysts are wary, others are expecting the stock to return to its former glory after COVID conditions stabilize.

Air Canada stocks may face a grim fate if COVID-19 vaccine doesn’t land in the markets quickly.