By Paul Goodwin, Editor of Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 2/5/13 Sign up for free Cabot Wealth Advisory e-newsletter
I have my eye on a Panamanian airline company that has shown years of steady progress and is now pushing out to new highs on good volume.
The company is Copa Holdings (CPA) and it’s a Panamanian airline, founded in 1947, that serves much of Central and South America from its hub in Panama City, with connections to the entire world through code-share agreements with United Airlines. The company now has 280 daily scheduled flights to 63 cities in 29 countries in the Americas and the Caribbean. Copa is primarily a passenger airline that has been growing quickly as the region’s economy gains momentum.
The company grew revenue by 29% in 2011 and has averaged nearly 25% growth so far this year, with a healthy 16.5% after-tax margin in its latest quarter. Another good sign is that the company’s stock pays a handsome dividend; the trailing annual dividend yield is 4.0%.
Copa is increasing the number of routes it serves, taking advantage of favorable load factor trends to strengthen its hold on the Central and South American market. Its fleet of modern Boeing and Embraer planes is standardized and well-maintained.
Another point in Copa’s favor is CPA’s favorable 15x P/E ratio. Copa will report its Q4 and 2012 results after the market closes on February 6, which is tomorrow. As usual, the most important thing won’t be the specific revenue, earnings and margins numbers, nor even the trend of those numbers. The big thing will be to watch what CPA does after the report. A gap up or push higher on strong volume will be the signal that investors are ready to buy more CPA. We don’t advise buying ahead of earnings reports, but jumping in early after investors push a stock higher is often a good way to proceed.