<div id="readability-page-1"><div><ul> <li>If you are wondering whether Air Canada at around $18.80 is still offering value or if most of the opportunity is already priced in, this article breaks down what the current share price really reflects.</li> <li>The stock has returned 4.2% over the past week and 5.3% over the last month, while year to date it is at a 4.9% decline and the 1 year return sits at 27.1%, with longer 3 year and 5 year periods at 11.0% and 24.5% declines respectively.</li> <li>Recent headlines around Air Canada have focused on its position within the wider airline sector, regulatory developments affecting carriers in Canada, and broader discussions about travel demand and capacity planning. These themes give useful context for the recent share price moves and help frame what investors might be paying for today.</li> <li>On Simply Wall St's 6 point valuation framework, Air Canada currently scores 5 out of 6. That sets up a closer look at how different valuation methods line up on the stock, and hints at an even more helpful way to think about value that will be covered at the end of this article.</li> </ul> Find out why Air Canada's 27.1% return over the last year is lagging behind its peers. <h3>Approach 1: Air Canada Discounted Cash Flow (DCF) Analysis</h3> A DCF model estimates what a stock could be worth by projecting the cash the company might generate in the future and discounting those cash flows back to today in CA$ terms. For Air Canada, the model starts with last twelve months free cash flow of about CA$1.50b. Using a 2 Stage Free Cash Flow to Equity approach, analysts provide specific forecasts up to 2029, with CA$1,857m projected for that year, and Simply Wall St extrapolates additional estimates out to 2035. All of these projected cash flows are discounted to reflect their value today in CA$. Adding those discounted cash flows together results in an estimated intrinsic value of CA$108.21 per share. With a current share price around CA$18.80, the model implies the stock is 82.6% undervalued according to this DCF setup. On these cash flow assumptions, the DCF points to a wide gap between price and estimated value. Result: UNDERVALUED Our Discounted Cash Flow (DCF) analysis suggests Air Canada is undervalued by 82.6%. Track this in your watchlist or portfolio, or discover 4 more high quality undervalued stocks. <figure><img height="476" src="https://imageproxy.pbkrs.com/https://images.simplywall.st/company/899f5893-6163-440e-8342-e70a6807ba42/chart/dcf/query-ZGF0ZT0yMDI2LTA1LTA2?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="746" original-src="https://imageproxy.pbkrs.com/https://images.simplywall.st/company/899f5893-6163-440e-8342-e70a6807ba42/chart/dcf/query-ZGF0ZT0yMDI2LTA1LTA2"/><figcaption>AC Discounted Cash Flow as at May 2026</figcaption></figure> Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Air Canada. <h3>Approach 2: Air Canada Price vs Earnings</h3> For profitable companies, the P/E ratio is a useful way to see how much you are paying for each dollar of earnings, which makes it a practical cross check against the cash flow based view. A higher or lower P/E often reflects the market’s view on two things: how fast earnings might grow and how risky those earnings are. Higher growth and lower perceived risk tend to support a higher “normal” P/E, while lower growth or higher risk usually point to a lower one. Air Canada currently trades on a P/E of 6.94x. That sits below the Airlines industry average of 8.48x and well below the peer group average of 16.63x. Simply Wall St’s Fair Ratio for Air Canada is 15.77x, which is the P/E that would be expected given factors like its earnings profile, industry, profit margin, market cap and risk characteristics. The Fair Ratio approach goes further than a simple comparison to peers or the industry because it adjusts for company specific traits instead of assuming all airlines deserve the same multiple. Since Air Canada’s current P/E of 6.94x is materially below the Fair Ratio of 15.77x, the multiple based view points to the stock being priced below this benchmark. Result: UNDERVALUED <figure><img height="476" src="https://imageproxy.pbkrs.com/https://images.simplywall.st/company/899f5893-6163-440e-8342-e70a6807ba42/chart/pe-multiple-vs-industry/query-ZGF0ZT0yMDI2LTA1LTA2?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="746" original-src="https://imageproxy.pbkrs.com/https://images.simplywall.st/company/899f5893-6163-440e-8342-e70a6807ba42/chart/pe-multiple-vs-industry/query-ZGF0ZT0yMDI2LTA1LTA2"/><figcaption>TSX:AC P/E Ratio as at May 2026</figcaption></figure> P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 2 top founder-led companies. <h2>Upgrade Your Decision Making: Choose your Air Canada Narrative</h2> Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you attach a clear story about Air Canada to the numbers by tying your view on its future revenue, earnings and margins to a forecast and a Fair Value that you can then compare with the current price. Because these Narratives on the Community page are updated when fresh news or earnings arrive, you can see in real time how a more optimistic fair value view around CA$31.16 and a more cautious fair value view around CA$17.00 can both coexist. This can help you decide which story you think is more reasonable and what that implies for whether the stock looks expensive or cheap to you today. For Air Canada, however, we will make it really easy for you with previews of two leading Air Canada Narratives: Each one ties a clear story and set of assumptions to a specific fair value, so you can decide which feels closer to your own expectations around the stock. 🐂 Air Canada Bull Case Fair value: CA$23.48 Implied undervaluation vs current price: 19.9% Revenue growth assumption: 7.18% <ul> <li>Analysts expect steady revenue growth and slightly higher profit margins over the next few years, supported by long haul international routes, premium cabins and loyalty driven ancillary income.</li> <li>Fleet renewal with A220s, 737 MAX and A321XLR aircraft, together with digital and Aeroplan initiatives, is expected to support efficiency and more recurring, higher margin cash flows.</li> <li>Key risks flagged include higher labor costs, competition on international routes, uneven demand in some markets, heavy capital spending and changing travel patterns that could pressure margins.</li> </ul> 🐻 Air Canada Bear Case Fair value: CA$17.00 Implied overvaluation vs current price: 10.6% Revenue growth assumption: 6.06% <ul> <li>Bears focus on higher regulatory and environmental costs, ongoing fuel and emissions pressures and the potential impact of remote work on premium and corporate travel demand.</li> <li>Higher leverage, ongoing aircraft investment and cost disadvantages versus lower cost carriers are seen as constraints on free cash flow and future earnings power.</li> <li>This view assumes more modest revenue growth, thinner profit margins and a fair value that sits closer to the lower end of the current analyst target range.</li> </ul> If you want to see how these narratives are built line by line, you can compare their full assumptions, risks and valuation logic directly on the Community page and stress test them against your own expectations for fuel costs, demand and execution over the next few years. To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Air Canada on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves. Do you think there's more to the story for Air Canada? Head over to our Community to see what others are saying! <figure><img height="476" src="https://imageproxy.pbkrs.com/https://images.simplywall.st/company/899f5893-6163-440e-8342-e70a6807ba42/chart/quote-price/query-ZGF0ZT0yMDI2LTA1LTA2?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="746" original-src="https://imageproxy.pbkrs.com/https://images.simplywall.st/company/899f5893-6163-440e-8342-e70a6807ba42/chart/quote-price/query-ZGF0ZT0yMDI2LTA1LTA2"/><figcaption>TSX:AC 1-Year Stock Price Chart</figcaption></figure> 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.<div><h3>New: Manage All Your Stock Portfolios in One Place</h3>We've created the ultimate portfolio companion for stock investors, and it's free.• Connect an unlimited number of Portfolios and see your total in one currency • Be alerted to new Warning Signs or Risks via email or mobile • Track the Fair Value of your stocks Try a Demo Portfolio for Free</div></div></div>

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Air Canada (TSX:AC) is currently priced at around CA$18.80, showing a 4.2% increase over the past week and a 5.3% increase over the last month, despite a year-to-date decline of 4.9%. A Discounted Cash Flow (DCF) analysis suggests the stock is undervalued by 82.6%, with an estimated intrinsic value of CA$108.21 per share. Additionally, its P/E ratio of 6.94x is below the industry average, indicating further undervaluation. Recent headlines focus on regulatory developments and travel demand, providing context for the stock's performance.

Is Air Canada (TSX:AC) Still Attractive After Recent Share Price Recovery And Sector Headlines