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Air Canada stock has climbed strongly over the past year, yet the latest valuation checks still point to the shares looking inexpensive on several metrics, even as fresh headlines around higher fuel costs and a large Aeroplan transaction shape the investment debate.
Air Canada has returned 55.7% over the past year, which puts extra focus on whether the current share price already reflects the recent improvement in sentiment.
Investor expectations may be supported by resilient travel demand and the planned Aeroplan equity investment, while rising fuel costs remain a key risk for margins and future cash generation.
On Simply Wall St’s broader valuation checks, Air Canada screens as undervalued in 5 of 6 areas, which suggests the overall picture still leans cheap rather than fully priced.
The issue now is whether Air Canada’s recent share price strength leaves enough upside to justify the current valuation signals.
Does Air Canada Look Undervalued on Earnings?
The P/E multiple suits Air Canada because earnings are a key yardstick many investors watch for airlines. Air Canada currently trades on a P/E of about 10.8x, which sits slightly below the Airlines industry average of roughly 11.6x and far below the wider peer group average of about 23.0x. The fair P/E ratio for Air Canada, based on its specific profile, is estimated at about 16.4x. This estimate is meaningfully higher than where the stock stands today.
Despite the recent Aeroplan investment news helping sentiment around Air Canada, the current P/E still prices the stock at a discount to what this fair ratio implies. The gap between the 10.8x market multiple and the 16.4x fair multiple suggests the market is applying a cautious earnings valuation even with solid interest in the stock.
On the P/E multiple alone, Air Canada stock appears undervalued relative to both its tailored fair ratio and broader peers.
TSX:AC P/E Ratio as at Aug 2026
See what the numbers say about this price — find out in our valuation breakdown.
The Air Canada Narrative: What Would Justify Today’s Price?
Simply Wall St Narratives pick up where the P/E debate for Air Canada leaves off by spelling out what kind of future growth, margins and earnings would need to play out for the stock to be worth materially more or less than it is today, and they sit within the Community page. Rather than leaning on a single multiple or model, each one lays out the assumptions behind its view of fair value so you can compare them with Air Canada’s results as they are reported.
One of the top community narratives on Air Canada: 21% overvalued
“Rising labor costs, competitive yield pressure, limited geographic diversification, high capital expenditures, and shifting travel demand dynamics threaten profitability and revenue stability…”
Read one of the top narratives on Air Canada
Do you think there’s more to the story for Air Canada? Head over to our Community to see what others are saying!
The Bottom Line
Air Canada still screens as undervalued on market multiples, even after the recent strength in sentiment and the focus on Aeroplan and fuel costs. The key question is whether that discount reflects genuine mispricing or simply prices in the ongoing exposure to higher operating costs and capital needs. For you, the crux is whether Air Canada can protect margins and cash generation well enough for the current P/E gap to close over time. The stock looks inexpensive on the numbers, and the debate now centers on whether that gap is an opportunity or compensation for the risks discussed above.
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.
Companies discussed in this article include AC.TO.
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