Air Canada (TSX:AC) Could Be 21% Undervalued As New Routes Test Its Premium P/E

Air Canada (TSX:AC) just laid out a major 2027 route expansion, adding new links from Canada to Europe and China. This gives investors fresh information on how the airline is thinking about future capacity.

Recent trading has been choppy for Air Canada, with the share price down 4.1% over the past week and roughly 10.1% over the past month. However, the 90 day share price return of 28.1% and 1 year total shareholder return of 46.8% suggest momentum has been building as investors weigh these new route announcements alongside steady news on partnerships, loyalty products and broader travel demand.

Scan how Air Canada’s route-driven story compares with other carriers by reviewing the hand picked list of solid balance sheet and fundamentals (7 results) building on international expansion and resilient travel demand.

After a 46.8% total return over the past year and a fresh round of long haul growth plans, does Air Canada still offer a favourable trade off between potential upside and the risks on the table as you look at valuation next?

Most Popular Narrative: 21.1% Undervalued

Air Canada’s most followed valuation story pegs fair value at CA$34.89 against a last close of CA$27.53, which implies meaningful upside in that framework.

Aggressive international long-haul network expansion, notably into Latin America, Europe, and Southeast Asia, alongside successful development of sixth freedom traffic, positions Air Canada to capture a larger share of connecting global passengers, supporting both top-line growth and load factor resilience.

Read the complete narrative. Read the complete narrative.

Want to see what is baked into that fair value gap? The narrative leans on a blend of steady revenue expansion, modest margin lift, and a richer earnings multiple.

The narrative framework rests on analysts modelling ongoing revenue progress, higher profits over time, and a future earnings multiple above the wider Canadian airlines peer group. It also leans on discounting those projected cash flows at just over 10%, which keeps more of that future value intact in today’s terms and helps explain why the implied fair value sits above the current CA$27.53 share price.

Result: Fair Value of CA$34.89 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

Still, the Air Canada story could be disrupted if rising labour costs squeeze already thin profit margins or if weaker transborder demand persists.

Find out about the key risks to this Air Canada narrative.

Another View on Air Canada’s Valuation

There is a very different signal once you shift from Air Canada’s fair value estimate to its current P/E. The stock trades on 17.9x earnings, compared with 10.9x for the global airlines group and a 19x fair ratio. That points to a richer tag than many carriers, even if it still sits close to what the model suggests the multiple could move toward. The real question is whether you see that premium as justified by the story or as extra risk if sentiment cools.

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Mixed signals around Air Canada’s valuation story make this a good moment to move beyond headlines and check the underlying data yourself. To weigh both sides of the debate, review the 2 key rewards and 2 important warning signs.

Looking for more investment ideas beyond Air Canada?

If Air Canada has sharpened your curiosity, do not stop here. Fresh ideas often show up where expectations are lower and balance sheets look sturdier.

• Target potential mispricing by scanning companies that combine quality fundamentals with attractive valuations through the 5 high quality undervalued stocks.
• Strengthen your income stream by reviewing businesses that offer resilient cash flows and higher yields using the 2 dividend fortresses.
• Prioritise resilience by focusing on firms with robust finances and cleaner leverage profiles in the 1 resilient stocks with low risk scores.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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