The Canadian equity market has seen notable growth this year, buoyed by easing recession concerns and renewed optimism among investors. As confidence returns and broader indices trend upward, many well-known stocks have rallied. However, not all quality names have kept pace. Some Canadian champions are still flying under the radar, creating opportunities for buying them at a discounted valuation.
One such beaten-down Canadian champion is Cargojet (TSX:CJT). Shares of this leading air cargo operator are down about 23% over the past year, despite its strong fundamentals and consistently solid financial performance.
For those with a long-term horizon, the pullback in Cargojet’s share price offers a compelling entry point. With its proven track record of strong financial performance and dominant market position, Cargojet stands out as a Canadian champion poised for a rebound.
Cargojet set for growth in 2025
The macroeconomic pressures have introduced some uncertainty into the stock as shifting trade policies may impact global cargo volumes. However, Cargojet continues to perform well. Its well-diversified business model and long-term contractual relationships add stability to its operations and position it well to deliver sustained revenue growth heading into the rest of 2025.
The company kicked off the year with strong momentum. In the first quarter of 2025, Cargojet posted solid revenues led by a 16% rise in domestic revenues and a 131% spike in charter revenues. These figures reflect the strength of its core business and its ability to capitalize on market opportunities. Operationally, the company delivered an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin north of 32%, signaling robust cost management and improved efficiencies throughout its network.
While macroeconomic uncertainty remains a concern, particularly regarding the future of trade flows and routing logistics, Cargojet could still deliver solid domestic revenue. Notably, as importers are likely to increasingly bring goods directly into Canada rather than routing them through North American entry points due to tariffs, Cargojet stands to benefit from increased demand in its domestic market.
The company is also focusing on enhancing its operational capabilities. Investments in network interconnectivity are expected to yield further cost efficiencies. Furthermore, it is on track to maintain its net debt-to-adjusted EBITDA ratio between 1.5 times and 2.5 times and has a solid balance sheet. Its financials will support ongoing dividend growth and position the company to pursue growth opportunities.
In short, Cargojet appears well-equipped to deliver steady growth despite external pressure.
Why Cargojet looks like a long-term winner?
Cargojet is a compelling long-term investment story, with several structural advantages that suggest the potential for sustained growth. Its dominant position in Canada’s time-sensitive air cargo market, extensive domestic network, and fast delivery capabilities provide a competitive edge and set a strong foundation for future growth.
Cargojet could benefit from growing e-commerce penetration. As digital adoption grows, Cargojet is well-positioned to capitalize on this trend. Its infrastructure and operational scale allow it to serve this high-growth market and efficiently deliver steady gains.
Adding further stability to its outlook are Cargojet’s solid long-term commercial agreements. These contracts are structured with minimum volume guarantees, ensuring customers pay for reserved space on aircraft whether they use it or not. Most of these contracts have tenure of between 4 and 10 years, and include options for extension. Further, around 75% of the company’s domestic revenue comes from these long-term deals, providing a consistent revenue base and reducing volatility. The contracts also include built-in annual price increases tied to inflation, helping protect margins over time.
With 41 freighters (88% of which are owned), Cargojet has built a scalable, efficient platform that can grow alongside customer demand and contract wins. This flexibility means Cargojet can meet rising volume requirements without significant delays or costs, supporting both top-line growth and operational efficiency.
Taken together, Cargojet’s strong market position, solid contract structure, scalable fleet, and alignment with the fast-growing e-commerce sector make it a compelling opportunity for long-term investors.
