Transportation is an essential industry for our economy, making these stocks some of the best to buy and hold for years.
There are plenty of different types of transportation stocks, from trucking and logistics businesses to marine shipping businesses.
The many subsectors of transportation offer investors a lot of choices. For example, railroads are typically highly defensive businesses, whereas airlines are in recovery mode and offer more risk but also more reward.
Although sectors like real estate or tech are often more popular, there are plenty of high-quality transportation stocks to consider for your portfolio.
For example, both Air Canada (TSX:AC) and Cargojet (TSX:CJT) are two of the top transportation stocks to buy today.
A top recovery stock to buy while it’s still undervalued
With all the pent-up demand from consumers to travel and go on vacation, Air Canada has already begun to make a significant recovery. However, it still has a long way to go, and its share price is still well off its pre-pandemic price, which is creating a major opportunity for investors.
For seven straight quarters now, Air Canada stock has increased its sales by at least 50% year over year. Not only that, but as it continues to grow its sales, it’s naturally becoming more profitable.
This is creating the potential that Air Canada stock could begin to rally soon, which is why it’s one of the best Canadian transportation stocks to buy now.
For example, although it’s expected to grow its revenue by just 23.5% year over year in 2023, analysts estimate that its earnings before interest, taxes, depreciation, and amortization (EBITDA) will increase by just under 90% this year.
In addition, Air Canada is expected to report positive earnings per share (EPS) in 2023, the first full year of positive EPS since the start of the pandemic.
Right now, Air Canada stock trades at 28.6 times its estimated 2023 earnings. However, it’s trading at just 7.3 times its estimated earnings in 2024. In addition, its average analyst target price is $27 — a roughly 35% premium from where it trades today.
Therefore, Air Canada stock is clearly undervalued and has a tonne of potential to rally this year, making it one of the best transportation stocks to buy now.
A rapidly growing transportation stock to buy now
Cargojet is another stock that offers investors tremendous upside both in 2023 and for years to come due to its significant growth potential. Therefore, there’s no doubt it’s one of the top transportation stocks you can buy.
Plus, in addition to its incredible growth potential, the stock has become unbelievably cheap over the last year as a worsening economy impacts its valuation.
One of the biggest reasons Cargojet has had such a strong performance in recent years was due to the rising popularity of e-commerce and the significant increase in demand for air transport and time-sensitive shipping that this rising popularity has created.
Therefore, as the economic environment has faced headwinds over the last year, and many e-commerce stocks have sold off significantly, it’s not surprising that Cargojet has followed suit.
However, the company continues to perform well and is now trading considerably undervalued, making it one of the best transportation stocks to buy now.
In fact, Cargojet is yet to see a dropoff in sales, yet its stock price is trading more than 35% off its 52-week high. At this level, Cargojet’s enterprise value-to-EBITDA ratio is 8.05 times, down significantly from its three-year average of 11.65 times.
Furthermore, its average target price from analysts is $192.55 — a more than 50% premium from today’s price. So, if you’re looking to increase your exposure to transportation stocks, there’s no doubt that Cargojet is one of the best stocks you can buy now.
