As many investors have come to know, finding the right stock at the right price can be a very difficult task. However, the recent downturn in the market has created a plethora of opportunities, especially in the airline industry. Let’s take a look at three stocks that are now trading at inexpensive valuations compared with their five-year averages, so you can decide which would be the best fit for your portfolio.
1. WestJet Airlines Ltd.
WestJet Airlines Ltd. (TSX:WJA) is one of the largest airline companies in North America. At today’s levels, its stock trades at 7.9 times fiscal 2015’s estimated earnings per share of $3.01 and 8 times fiscal 2016’s estimated earnings per share of $2.99, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 13.9.
In addition, WestJet pays a quarterly dividend of $0.14 per share, or $0.56 per share annually, giving its stock a 2.3% yield.
2. Chorus Aviation Inc.
Chorus Aviation Inc. (TSX:CHR.B) is a Canadian-based holding company engaged in airline services throughout Canada. At current levels, its stock trades at seven times fiscal 2015’s estimated earnings per share of $0.80 and 6.7 times fiscal 2016’s estimated earnings per share of $0.83, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 9.8.
Also, Chorus pays a monthly dividend of $0.04 per share, or $0.48 per share annually, which gives its stock an 8.6% yield.
3. Air Canada
Air Canada (TSX:AC) is one of the largest full-service airline companies in Canada. At today’s levels, its stock trades at 3.2 times fiscal 2015’s estimated earnings per share of $3.75 and 3.4 times fiscal 2016’s estimated earnings per share of $3.56, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 36.9.
Air Canada does not currently pay a dividend, but it generated $682 million of free cash flow in the first half of fiscal 2015, so if it can keep this up, I think it could initiate a quarterly dividend or pay a special dividend in 2016.
Which of these stocks belongs in your portfolio?
WestJet Airlines, Chorus Aviation, and Air Canada represent three of the best long-term investment opportunities in the airline industry. All Foolish investors should strongly consider beginning to scale in to positions in one of them today.
