The Future of Travel: 3 Airline Stocks to Watch in May 2023

The airline industry is expected to grow steadily with strong demand and technological advancements despite economic uncertainty. Investors should consider adding quality airline stocks like Gol Linhas Aereas, Copa Holdings, and Controladora Vuela to their watchlists. Continue reading.

With technology advancements and steady demand, the airline industry is on the rise. The airline sector is growing with technology improvements and steady demand. You may want to add VLRS de C.V.

Airport Council International World (ACI) and SITA, in their Airport IT Insights Survey report, found that airports invest more in technology in order to digitalize operations. They also want to provide an efficient journey for passengers through self-service options.

According to the International Air Transport Association, revenue passenger kilometers (RPKs) have increased by 55.5% in February 2023 compared to February 2023 traffic statistics.

Willie Walsh is the Director General of IATA. He said: "Despite uncertain economic signals the demand for air travel remains strong around the world, and in particular, the Asia-Pacific area. The industry's demand is about 15% lower than what it was in 2019, and the gap is shrinking every month.

The global airline market will also grow at a 3.7% CAGR until 2030.

Let's dig deeper into the fundamentals.

Gol Linhas Aereas Inteligentes S.A.

GOL, with its headquarters in Sao Paulo in Brazil, provides passengers and cargo scheduled and non-scheduled transportation, as well as maintenance services on aircrafts and component parts in Brazil and abroad.

GOL's price/sales multiple is 0.15, 88.9% less than the industry standard of 1.32. The company's forward EV/EBITDA multiplication of 5.52 is 48.6% less than the industry standard of 10.54.

GOL's CAPEX/Sales for the trailing 12 months is 4.01%, which is 35.6% more than the average industry figure of 2.96%. The ROTC for the trailing 12 months is 33.45%, which is 374% more than the average industry ROTC.

GOL's operating net revenues for the first quarter of 2023 increased by 52.8% over the previous year to R$4.92billion ($986.11m). Passenger transportation revenue increased by 50.6a% over the past year to R$4.53billion ($909.27m). The company's operating income was R$796.50 ($159.64) million, up 93% from the previous year.

Analysts predict that GOL's revenues will increase by 8.4% annually to $4.14 Billion in 2024. The EPS for the same time period is expected to increase by 216.4%. GOL shares are up 3% in the last month, closing the last session at $2.71.

GOL's Power Ratings reflect this positive outlook. The stock is rated B overall, which is equivalent to a Buy under our proprietary rating system. The POWR ratings assess stocks based on 118 factors, each of which has its own weighting.

GOL is rated B for Growth Sentiment and Quality. It is ranked 7th out of 27 stocks in the B-rated Airlines Industry. Click here to see GOL's additional POWR ratings for Value, Stability, and Momentum.

Copa Holdings, S.A. (CPA)

CPA is based in Panama City. The company provides passenger and cargo airline services. From its Panama City hub, the company operates 204 scheduled flights daily to 69 destinations in 29 countries across North, Central and South America, as well as the Caribbean.

The company's price/cash flow multiple is 4.28x, which is 66.5% less than the industry standard of 12.78x. Its EVEBITDA multiple is 4.68x, which is 55.6% less than the average industry value of 10.54.

CPA's EBITDA margins and EBITDA for the trailing 12 months of 21.72%, and 15.19%, are 65.5% higher and 58.9% more than industry averages at 13.12% and 9.6% respectively.

CPA's total revenues for the fourth quarter of fiscal 2022 ended in December increased by 10%. They reached $890.61 millions. The operating profit was $219.66 millions, which represents a 52.9% increase sequentially. CPA's total revenue from passengers was $852.29 millions, an increase of 10.1% over the previous quarter.

Street anticipates CPA revenue will increase 13.6% annually to $3.37 Billion in 2023. The company's earnings per share (EPS) will grow by 44.7% over the past year to $11.95 during that same time period. The stock closed the last trading day at $91.56 after gaining 34.9% over the past nine-month period.

CPA's overall B rating is not surprising. It equates to a Buy under our POWR Ratings System. It is rated A for Quality and Growth, and B for Sentiment. It is ranked 5th in the same industry.

In addition to the above ratings, we have also given CPA ratings for Value, Momentum and Stability. All CPA ratings are available here.

Controladora Vuela Compania de Aviacion, S.A.B. de C.V. (VLRS)

VLRS, a Mexican company, is engaged in the passenger airline transportation industry. The Company is an ultra-low cost carrier (ULCC). The Company's activities are divided between two geographic regions: Mexico and the United States (national operations), along with Central America and Central America (international operation).

VLRS's forward Price/Sales Multiple of 0.41 compares to the industry average of 1,32. The company's forward EV/EBITDA multiplication of 4.40 is 58.3% less than the industry standard of 10.54.

VLRS has a CAPEX/Sales ratio of 14.01x for the 12 months behind. This is 373.5% higher than industry average 2.96x. Its trailing-12 month gross profit margin is 100%, which is 232.6% more than the industry average of 30.1%.

VLRS total operating revenue for the first quarter of fiscal 2023 ended March 31st, 2023 increased by 28.9% over last year to $731m. The passenger revenue was $701 million and up 29.3% over the previous year, while non-passenger revenues were $30 million.

The revenue estimate consensus of $3.58 Billion for the year 2024 represents an increase of 7.9% year-over year. The company's EPS will grow 8% over the past year to $1.50 by 2024. The stock gained 40.1% in the past six-months to close at $11.91 during the last trading session.

The strong fundamentals of VLRS are reflected by its POWR ratings. The stock's overall rating is B, which translates to a Buy according to our proprietary rating system.

It is ranked 6th in the same sector. It is rated B for Growth and Sentiment. Click here to see the additional VLRS rating for Value, Stability, Momentum and Quality.

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GOL shares dropped $0.07 (-2.58%) in premarket trade on Tuesday. GOL shares have declined by 0.00% year-to-date compared to the benchmark S&P 500 index which has risen 8.83% during the same time period.

Rashmi K. Kumari

Rashmi's passion for capital markets, financial regulation, and wealth management led her to pursue an investment analyst career. She has a master's in commerce and aims to help individual investors understand complex financial issues.