Air transportation services provider Gol Linhas Aéreas Inteligentes S.A. (GOL - Get Rating), which is headquartered in Sao Paulo, Brazil, offers its services for passengers and cargo and provides maintenance services for aircraft and components in Brazil, the rest of South America, the Caribbean, and the United States. The company also provides the Smiles frequent flyer program, which allows its clients to accumulate and redeem miles.

The company’s total demand, measured in revenue passenger kilometers (RPK), increased 113.9% year-over-year in March. Its total seats increased 100.5%, while total departures climbed 101.5% year-over-year. Furthermore, the company resumed its regular operations in Asunción, the capital of Paraguay. GOL is set to have three weekly flights to and from Sao Paulo, offering 420 seats per week on each leg.

Furthermore, GOL expects an EBITDA margin of 11% for its fiscal first quarter of 2022, indicating a substantial increase over its negative 15.9% year-ago margin, while its passenger unit revenue is predicted to be up 45% year-over-year. However, the company also expects a loss per share of approximately R$1.98 and a loss per ADS of approximately $0.78. But GOL’s stock has declined 13.8% in price 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. Also, the 12-month median price target of $8.50 indicates a 19.1% potential upside.

Here is what could shape GOL’s performance in the near term:

Decent Financials

For its fiscal fourth quarter of 2021, GOL’s net operating revenue increased 54.5% year-over-year to R$2.92 billion ($621.57 million). The company’s adjusted EBITDA and adjusted EBIT increased 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 Analyst Sentiments

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 rise 112.9% from the prior-year quarter to $610.87 million. And for its fiscal quarter ending June 30, 2022, analysts expect the company’s revenue to improve 226.8% from the same period in the prior year to $634.68 million. However, its EPS for the same quarter is expected to decline 185.2% year-over-year.

In addition, among the three Wall Street analysts who have rated GOL, two have rated it Hold, while one has rated it Buy.

Mixed Valuations

In terms of its forward EV/Sales, GOL is currently trading at 2.04x, which is 24.2% higher than the 1.65 industry average. Conversely, the stock’s 0.48 forward Price/Sales multiple is currently trading 63.4% lower than the 1.30 industry average.

POWR Ratings

GOL has an overall C rating, which equates to neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

GOL has a Value grade of C, which is in sync with its mixed valuations.

The stock has a D grade for Stability, which is justified by its 1.56 five-year monthly beta.

In the 31-stock, F-rated Airlines industry, GOL is ranked #21. Click here to see the additional POWR Ratings for GOL (Growth, Momentum, Sentiment, and Quality).

View all the top-rated stocks in the Airlines industry here.

Bottom Line

GOL has been increasing its operations as COVID-19-related restrictions have eased out, which is evident in its solid top-line growth. However, with the company expecting its EPS to remain negative in its about to be reported quarter ended March 31, 2022, and its high beta indicating volatility, we think it could be wise to wait for a better entry point in the stock.

GOL shares were unchanged in premarket trading Tuesday. Year-to-date, GOL has gained 18.02%, versus a -6.11% rise in the benchmark S&P 500 index during 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. More...

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