Make better investment decisions with Simply Wall St's easy, visual tools that give you a competitive edge.

If you are wondering whether Air Canada shares are offering good value at current levels, it helps to step back and look at what the recent price moves and fundamentals are really telling you. The stock last closed at C$19.52, with a 7.1% return over the past year, a modest 1.4% gain over 30 days and a 6.3% decline over the past week, leaving year to date returns at a 1.3% decline and the 3 and 5 year periods at declines of 15.7% and 16.2% respectively. Recent headlines around Air Canada have focused on ongoing operational recovery and capacity planning, along with broader sector discussions about travel demand and cost pressures. These themes help frame how investors are thinking about risk and resilience. They are important context when you look at a share price that has moved both up and down over different time frames, as they can influence how the market is pricing future expectations. Simply Wall St currently assigns Air Canada a valuation score of 6 out of 6, based on checks of whether the company screens as undervalued on several metrics. Next we will walk through what those methods look at, before finishing with a broader way to think about valuation that brings the whole picture together.

Find out why Air Canada's 7.1% return over the last year is lagging behind its peers.

Approach 1: Air Canada Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business might be worth today by projecting its future cash flows and discounting them back to a present value.

For Air Canada, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month Free Cash Flow is about CA$1.71b. Analyst inputs and extrapolated estimates suggest Free Cash Flow projections over the next decade that range from a CA$447.5m outflow in 2026 to around CA$3.35b by 2035, with a specific projection of CA$1.90b in 2029. Simply Wall St notes that analyst estimates typically extend only a few years, so later years are extrapolated from those earlier assumptions.

When all these projected cash flows are discounted back, the model produces an estimated intrinsic value of CA$82.85 per share. Compared with the recent share price of about CA$19.52, this implies the stock is 76.4% undervalued on this measure.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Air Canada is undervalued by 76.4%. Track this in your watchlist or portfolio, or discover 5 more high quality undervalued stocks.

Story Continues

AC Discounted Cash Flow as at Feb 2026

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Air Canada.

Approach 2: Air Canada Price vs Sales

For a company like Air Canada, which operates in a capital intensive and cyclical industry, the P/S ratio is a useful way to think about value because it focuses on what investors are paying for each dollar of revenue rather than accounting based earnings that can swing with one off items.

In general, higher growth expectations and lower perceived risk can justify a higher “normal” or “fair” trading multiple, while slower expected growth or higher risk usually line up with a lower multiple. With P/S, the question is how much revenue growth and margin stability investors believe is reasonable, given the risks.

Air Canada currently trades on a P/S ratio of 0.26x, compared with the Airlines industry average of about 0.66x and a peer average of about 25.88x. Simply Wall St also calculates a proprietary “Fair Ratio” of 1.21x for Air Canada, which is the multiple it might trade on after adjusting for factors such as earnings growth, profit margins, industry, market cap and specific risks.

This Fair Ratio can be more informative than a simple industry or peer comparison because it ties the multiple to the company’s own characteristics rather than assuming it should match a broad group.

Because Air Canada’s current 0.26x P/S sits well below the 1.21x Fair Ratio, the shares screen as undervalued on this metric.

Result: UNDERVALUEDTSX:AC P/S Ratio as at Feb 2026

P/S ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 3 top founder-led companies.

Upgrade Your Decision Making: Choose your Air Canada Narrative

Earlier we mentioned that there is an even better way to understand valuation, so Narratives let you attach a clear story to your numbers by linking your view of Air Canada’s future revenues, earnings and margins to a financial forecast and then to your own fair value, all inside a simple tool on Simply Wall St’s Community page that millions of investors already use.

With a Narrative, you compare your Fair Value to today’s market price to help decide whether the gap between the two is big enough for you to consider buying or selling, and the platform keeps that view up to date automatically when new earnings, news or other information is added.

For Air Canada, one investor might lean toward a more optimistic Narrative that lines up with a higher fair value around CA$31.16. Another might prefer a more cautious Narrative closer to CA$19.00. Both views can sit side by side so you can see exactly which assumptions are driving the difference rather than relying only on headline multiples or price targets.

For Air Canada, however, we’ll make it really easy for you with previews of two leading Air Canada Narratives:

These are not buy or sell calls. They are two different ways of lining up the same facts on the business, its risks and its current share price so you can decide which assumptions feel closer to your own view.

🐂 Air Canada Bull Case

Fair value in this narrative: CA$24.36

Implied discount to that fair value at the last close of CA$19.52: about 20% undervalued

Revenue growth assumption: about 6.6% per year

Assumes strong global travel demand, premium cabins and an expanding international network keep supporting revenue, even with more modest profit margins. Builds in benefits from fleet renewal, cost efficiency efforts, digital tools and Aeroplan loyalty, which together support recurring cash flows and earnings over time. Leans on analyst forecasts that point to a fair value in the mid CA$20s, with share repurchases reducing the share count and helping earnings per share even if total earnings soften.

🐻 Air Canada Bear Case

Fair value in this narrative: CA$19.00

Implied premium to that fair value at the last close of CA$19.52: about 3% overvalued

Revenue growth assumption: about 4.7% per year

Assumes tighter climate rules, higher carbon and fuel costs and heavier regulation add to expenses and pressure margins over time. Factors in softer business travel, high debt levels and ongoing aircraft spending, which together limit financial flexibility and keep free cash flow under pressure. Aligns with the lower end of analyst targets around CA$19.00, where the current price already sits close to what the more cautious camp sees as fair.

These two Narratives frame the same company in different ways, using explicit assumptions about growth, margins, regulation and capital spending. If you want to stress test your own view against these, the Simply Wall St Community lets you compare and build Narratives side by side so you can see exactly which inputs move your fair value the most and where you agree or disagree with other investors.

Curious how numbers become stories that shape markets? Explore Community Narratives

Do you think there's more to the story for Air Canada? Head over to our Community to see what others are saying!TSX:AC 1-Year Stock Price Chart

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

View Comments