Why Imperial Thinks Volaris Will Outperform

In a report published Thursday, analysts at Imperial Capital initiated coverage of

with an Outperform rating and a price target of $18. The analysts expect the company to report profitable top and bottom line growth of 10-12 percent and increasing margins annually for the next several years. "While many US airlines have traded at all-time highs in recent months shares of Volaris continue to trade near the company's September 2013 IPO offer price of $12, despite an improving earnings track record and clear opportunities for future earnings growth," the analysts stated. According to Imperial Capital, the company's earnings should grow well above that driven by higher ancillary revenue if there is a greater focus on network and capacity discipline. This is why the analysts recommend investing in this stock now before the company's results draw more investor attention. The company has already applied the ALGT and SAVE business model to its recently tuned and trimmed domestic and growing Mexico-US international networks. "Similar to ultra-low cost carriers in the US, Volaris is combining an unbundled fare model with a rigorous market discipline and low operating costs in order to stimulate new traffic. The company has established a stable domestic business with top market share in both Guadalajara and Tijuana, two of the top ten largest cities in Mexico," Imperial Capital added. The company currently holds the second largest market share in Cancun and third highest market share in Mexico City.