Cargojet (TSX:CJT) is a Mississauga-based company that provides time-sensitive air cargo services in Canada. Today, I want to discuss why this top Canadian stock looks like a fantastic buy, as we approach the midway point in September. Let’s dive in.
Why I’m excited about this TSX stock for the long haul
Shares of Cargojet have dropped 15% in 2022 as of close on September 9. The stock is down 30% in the year-over-year period. This Canadian stock has seen its value decline steadily since reaching an all-time high of $250.01. It closed at $137.14 on September 9. Despite that drop, I’m still looking to snatch up this Canadian stock, as we near the end of the 2022 summer season.
The air freight market is one that is worth targeting for investors going forward. Allied Market Research recently estimated that the global air freight market was valued at $270 billion in 2019. The report projects that this market will reach $376 billion by 2027. That would represent a solid compound annual growth rate (CAGR) of 5.6% over the forecast period.
How does Cargojet look after its recent earnings release?
This company unveiled its second-quarter (Q2) fiscal 2022 earnings on July 27. It reported total revenues of $246 million — up from $172 million in the previous year. Cargojet benefited from strong growth in its domestic network. That included 15% growth in ACMI and 62% growth in All-in Charters. Meanwhile, it reported adjusted free cash flow of $44.8 million in Q2 2022, which was up from $36.0 million in the second quarter of fiscal 2021.
Uncertainty in the passenger airline space has continued to apply pressure to air-cargo supply chains in 2022. According to Cargojet’s earnings report, this has “further restricted the ability of cargo shippers to utilize belly space.” Fortunately, this has presented opportunities for Cargojet to capture this unmet demand in the months ahead. However, this should only be temporary, as commercial airliners slowly recover from the catastrophic conditions endured during the COVID-19 pandemic.
Despite this positive development, Cargojet has felt the impacts of soaring inflation, geopolitical chaos, and surging fuel prices. Investors should look to its EBITDA, which stands for earnings before interest, taxes, depreciation, and amortization. This measure seeks to give a better picture of a given company’s profitability. Cargojet last posted an adjusted EBITDA of $81.1 million — up from $67.4 million in the second quarter of fiscal 2021. Moreover, adjusted EBITDA in the first six months of 2022 has climbed 24% from the prior year to $164 million. This should excite investors.
Cargojet: Why I’m buying this TSX stock today
Shares of this Canadian stock currently possess a price-to-earnings ratio of 12. That puts Cargojet in favourable value territory at the time of this writing. The stock also offers a quarterly dividend of $0.286 per share, which represents a modest 0.8% yield. Canadian investors should be attracted to Cargojet’s potential, as the stock is well positioned for big earnings growth in the quarters to come.
