We Might See A Profit From Air Canada (TSE:AC) Soon

With the business potentially at an important milestone, we thought we'd take a closer look at Air Canada's (TSE:AC) future prospects. Air Canada provides domestic, U.S. transborder, and international airline services. With the latest financial year loss of CA$1.7b and a trailing-twelve-month loss of CA$722m, the CA$7.8b market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which Air Canada will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

See our latest analysis for Air Canada

Consensus from 13 of the Canadian Airlines analysts is that Air Canada is on the verge of breakeven. They expect the company to post a final loss in 2022, before turning a profit of CA$1.2b in 2023. Therefore, the company is expected to breakeven roughly a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 18% year-on-year, on average, which seems relatively fair. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving Air Canada's growth isn’t the focus of this broad overview, but, bear in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one issue worth mentioning. Air Canada currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. These losses tend to occur only on paper, however, in other cases it can be forewarning.

Next Steps:

This article is not intended to be a comprehensive analysis on Air Canada, so if you are interested in understanding the company at a deeper level, take a look at Air Canada's company page on Simply Wall St. We've also put together a list of relevant aspects you should further research:

1. Valuation: What is Air Canada worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Air Canada is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Air Canada’s board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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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.