Copa Holdings Trades at Premium Valuation: How to Play the Stock?

Copa Holdings, S.A. (CPA) looks expensive from a valuation standpoint. Considering the trailing 12-month enterprise value-to-sales ratio (EV/Sales-TTM), Copa Holdings is trading at a premium compared to the industry.

The stock has a trailing 12-month EV/Sales-TTM of 1.52X compared with 0.65X for the industry over the past five years. The company’s trailing 12-month EV/Sales-TTM ratio is also above the median level of 1.39X over the past five years. These factors indicate that the stock’s valuation is unattractive.

CPA EV/Sales Ratio (Trailing 12 Months) Vs. Industry

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Now, the question is whether it is worth buying, holding, or selling the Copa Holdings stock at current prices. Let us delve deeper to find out.

Headwinds Weighing on Copa Holdings Stock

Copa Holdings’ bottom line is burdened with a rise in operating expenses. The upside is due to an increase in fuel price, wages, salaries, benefits and other employees’ expenses, flight operations, sales and distribution and airport facilities and handling charges coupled with increased costs related to aircraft maintenance, materials and repairs. During fourth-quarter 2025, salaries, wages and benefits expenses rose 11.6% year over year, while expenses on aircraft maintenance, materials and repairs climbed 33.3%. Airport facilities and handling charges rose 6.7% year over year and flight operations expenses grew 10.8% year over year in the fourth quarter of 2025. Fuel expenses rose 13.7% year over year, and sales and distribution expenses grew 10% year over year. As a result, total operating expenses grew 11.6% year over year in fourth-quarter 2025.

High costs naturally put pressure on margins. Operating margin (which is calculated as operating income as a percentage of revenues) for fourth-quarter 2025 fell to 21.8% from 23.2% in fourth-quarter 2024.

A decrease in passenger yield is a concern as the decline in yield results in a reduction of unit revenues. Passenger yield declined 4.1% year over year in 2025, leading to a 2.6% reduction in revenue per available seat miles (a measure of unit revenues). A decline in passenger yield was mainly due to a revision of the unredeemed ticket revenue provision for tickets sold so far in the current year.

CPA Stock’s Price Performance

Shares of Copa Holdings stock have gained 21.2% over the past year, outperforming the transportation-airline industry’s 18% surge. However, CPA’s price performance looks unfavorable compared with that of other industry players like Southwest Airlines Co. LUV) and Ryanair Holdings RYAAY in the same timeframe.

CPA Stock's One-Year Price Comparison

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Tailwinds Working in Favor of Copa Holdings Stock

Passenger revenues have been a major contributor to Copa Holdings’ top-line growth. With people taking to the skies, CPA’s top line increased 9.6% on a year-over-year basis during fourth-quarter 2025, owing to a 9.4% rise in passenger revenues, which accounted for the bulk (94.8%) of the top line. Additionally, Copa Holdings’ traffic (measured in revenue passenger miles) grew 10.1% and capacity (measured in available seat miles) increased 9.9% year over year in fourth-quarter 2025. Since traffic growth outpaced capacity expansion, the load factor (percentage of seats filled by passengers) increased to 86.4% in fourth-quarter 2025. Given this encouraging backdrop, CPA’s management expects consolidated capacity to be up 11-13% year over year, and the operating margin is expected to be in the range of 22-24% for 2026.

Copa Holdings’ fleet-modernization initiatives to cater to the increased travel demand are encouraging. Apart from adding planes, this carrier is replacing the outdated models as part of its fleet modernization efforts so as to lower CO2 emissions. CPA ended 2025 with a consolidated fleet of 125 aircraft, which comprises 67 Boeing 737-800s, 32 Boeing 737 MAX-9s, 15 Boeing 737 MAX-8s, nine Boeing 737-700s, and two Boeing 737-800 freighters. In January 2026, CPA took delivery of one additional Boeing 737 MAX 8 aircraft, bringing its total fleet to 126 aircraft. Copa Holdings expects to end 2026 with 133 aircraft.

Copa Holdings’ solid balance sheet increases financial flexibility. The company ended fourth-quarter 2025 with cash, cash equivalents and short-term investments of $1.33 billion, higher than the current debt level of $172.88 million. This implies that the company has sufficient cash to meet its current debt obligations.

Long-Term Debt to Capitalization

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A solid balance sheet enables the company to reward shareholders with dividends and share repurchases. As a reflection of its shareholder-friendly stance, in 2025, Copa Holdings paid dividends of $265.8 million and repurchased shares worth $8.7 million. As of Dec. 31, 2025, CPA had $103.5 million available for share repurchases under the program. Such shareholder-friendly moves instill investor confidence and positively impact the company's bottom line.

What Do Earnings Estimates Say for CPA?

The positive sentiment surrounding Copa Holdings stock is evident from the fact that the Zacks Consensus Estimate for full-year 2026 and 2027 earnings has been revised upward in the past 60 days. The consensus mark for second-quarter 2026 earnings has also been projected northward in the past 60 days.

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The favorable estimate revisions indicate brokers’ confidence in the stock.

Time to Buy CPA Stock

Passenger revenues have been a major contributor to Copa Holdings’ top-line growth. The company’s fleet expansion and modernization initiatives to cater to the increased travel demand are encouraging too. CPA expects to end 2026 with 133 aircraft (which is higher than the 125 aircraft at 2025-end). A solid balance sheet enables CPA to reward shareholders.We believe that the positives surrounding the stock (as highlighted throughout in this write-up) outweigh the concerns regarding rising operating expenses related to salaries, wages, airport facilities and handling charges, flight operation costs and other administrative expenses.

We, therefore, suggest investors to add CPA stock to their portfolios for healthy returns. The company’s Zacks Rank #2 (Buy) further supports our thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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