Copa Holdings (NYSE:CPA), the operator of Latin American airline Copa Airlines, has lived through quite the saga over the past few years. After its shares peaked at around $160 in late 2013, a deep economic malaise caused demand to drop sharply in several of its most important markets, with the stock tumbling 75% to under $40 in 2015. As the company's prospects began to steadily improve last year, the stock price took off like a rocket again, more than doubling in 2016 on its way back up to $116 or so at the time of this writing.
While the worst appears to be in the rearview mirror for Copa, here are a handful of items I'll be keeping an eye out for when the airline reports its first-quarter earnings on May 10.

CPA Chart

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1. Continued economic recovery in Copa's key markets

More than any specific financial results, I'll be looking for signs of sustained economic recovery in some of Copa's largest markets. In the fourth quarter of 2016, Copa saw the first proof that consumer demand was finally beginning to strengthen again, which led to the first increase in passenger yield -- the average price paid per mile, per passenger -- in more than a year. The best part of this news was that the recovery appeared to be taking hold throughout its operating footprint, and not just in a few countries.

A Copa Airlines plane, flying above the clouds

Image source: Copa Holdings 

Copa believes demand should keep improving throughout 2017, but that will depend largely on how the economies in countries such as Brazil and Colombia fare. Fortunately for Copa, some additional green shoots are beginning to emerge. According to FocusEconomics, after five straight quarters of contraction, economists expect the Latin American economy as a whole to return to growth in the first quarter, with many of its regional currencies stabilizing as well.

What to watch for: Specific commentary on consumer behavior and booking trends in Brazil, Colombia, and/or Venezuela, which have been Copa's largest sources of weakness over the past couple of years.

2. Is revenue growth holding steady?

In 2015, during what was a very ugly year, Copa's top line fell by 17%. The airline didn't return to overall revenue growth until the third quarter of 2016. In the fourth quarter, Copa managed to post revenue growth of nearly 13%, which helped the company finish 2016 just about flat.

With demand forecast to improve and the company planning capacity growth of 6% this year, analysts are expecting more double-digit revenue growth ahead, especially as Copa laps a couple of weak year-ago comparisons over the next two quarters. Analysts, on average, are estimating Q1 revenue of $619.4 million, which would represent 11.2% growth.

What to watch for: Beating analyst estimates -- or better yet, beating last quarter's 13% growth figure -- would show that Copa's top line is finally getting back to healthy expansion rates.

3. Is operating margin heading back toward historical norms?

Before the struggles of the past two years, Copa was posting an impressive operating margin of more than 19%. But the weak demand situation also caused Copa's operating margin to fall precipitously -- to 11.8% in 2015 and 12.4% in 2016. Now that demand is returning, Copa's fare pricing should also improve, allowing margin to rebound as well.

With a little context, margin has already begun to get better. Copa's 2016 operating margin would have been 16.7% excluding some costly fuel-hedge losses. And for full-year 2017, management is guiding for operating margin of 15% to 17%, which is a lot closer to the numbers the company was putting up in its glory days.

What to watch for: Just meeting its own guidance would go a long way toward restoring confidence that Copa's profit picture is set to improve. Keep in mind, however, that operating-margin results can be pretty lumpy from quarter to quarter, and the first quarter is generally the softest in terms of consumer demand. So as long as the company's full-year margin target appears achievable, investors shouldn't put too much emphasis on one quarter's results in isolation.

In short, the stage looks set for Copa's recovery to keep gaining steam. If the airline can deliver solid revenue growth and operating-margin expansion as the economic recovery spreads across Latin America, Copa should continue to reward shareholders who have held on to this well-run company over the past few years. {sfr%}

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.