The airline Gol Linhas Aereas Inteligentes (GOL) has stepped up operations over the past month. However, the company expects its EPS to remain negative in its first fiscal quarter. So, is it wise to buy GOL shares now? Read on for our take.
Air transport service provider Gol Linhas Aéreas Inteligentes SA (GL), headquartered in Sao Paulo, Brazil, offers its passenger and cargo services and provides maintenance services for aircraft and components in Brazil, the rest of South America, the Caribbean and in the United States. The company also offers the Smiles loyalty program, which allows its customers to accumulate and redeem miles.
The company’s total demand, measured in Revenue Passenger Kilometers (RPK), rose 113.9% year-over-year in March. The total number of seats increased by 100.5%, while the total number of departures increased by 101.5% year-on-year. Furthermore, the company has resumed its regular activities in Asunción, the capital of Paraguay. GOL is expected to have three weekly flights to and from Sao Paulo, offering 420 seats per week on each leg.
In addition, the GOL expects a EBITDA margin of 11% for its first fiscal quarter 2022, indicating a substantial increase from its negative margin of 15.9% a year ago, while its passenger unit revenue is expected to rise 45% year-on-year. However, the company also expects a loss per share of around R$1.98 and a loss per ADS of around $0.78. But GOL’s stock price is down 13.8% over the past year and 1.4% over the past six months. The stock has gained 18% year-to-date and 37.3% over the past month to close yesterday’s trading session at $7.14. Additionally, the 12-month median price target of $8.50 indicates upside potential of 19.1%.
Here’s what could shape GOL’s performance in the short term:
For its fourth fiscal quarter of 2021, GOL’s net operating income increased 54.5% year-on-year to reach 2.92 billion reais ($621.57 million). The company’s Adjusted EBITDA and Adjusted EBIT increased by 88.4% and 146.9% respectively from the prior year quarter to R$1.05 billion ($223.78 million) and R$856.60 million ($182.20 million).
Mixed feelings from analysts
For the fiscal quarter ended March 31, 2022, GOL’s EPS is expected to increase 96.1% year-over-year, while its revenue is expected to increase 112.9% from the fiscal quarter. previous year to reach $610.87 million. And for its fiscal quarter ending June 30, 2022, analysts expect the company’s revenue to grow 226.8% year-over-year to $634.68 million. . However, its EPS for the same quarter is expected to decline 185.2% year-over-year.
Additionally, of the three Wall Street analysts who rated GOL, two noted itwhile it was rated Buy.
In terms of EV/Futures, GOL is currently trading at 2.04x, which is 24.2% higher than the industry average of 1.65. Conversely, the stock’s price-to-forward multiple of 0.48 is currently trading 63.4% below the industry average of 1.30.
GOL has an overall C rating, which equates to neutral in our own POWR Rankings system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.
GOL has a value rating of C, which is in line with its mixed valuations.
The stock has a D rating for Stability, which is justified by its five-year monthly beta of 1.56.
In the F-rated airline industry, which has 31 stocks, GOL is ranked No. 21. Click here to see additional POWR ratings for GOL (Growth, Momentum, Sentiment and Quality).
See all the top rated stocks in the airline industry here.
GOL has increased its operations as COVID-19 restrictions eased, which is evident in its solid revenue growth. However, with the company expecting EPS to remain negative in its about-to-be-released quarter ending March 31, 2022, and its high beta indicating volatility, we think it might be wise to wait for a better entry point in the title.
GOL shares were unchanged in premarket trading on Tuesday. Year-to-date, the GOL has gained 18.02%, compared to a -6.11% rise in the benchmark S&P 500 over the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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