Is Wizz Air plc now a contrarian buy after Q3 profit warning sends shares plummeting?

Shares in budget airline Wizz Air(LSE: WIZZ) tanked over 12% in early trading this morning after the company trimmed profit expectations in light of lower air fares and poor weather. Nevertheless, thanks to the company's seriously low valuation, strong financial position and plans for growth, I see today's adverse reaction as yet another opportunity for risk-tolerant, patient investors to climb on board.

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The price of prudence

Sure, initial impressions weren't good. Despite reporting a 104% rise in pre-tax profits to £33.1m, underlying net profit at the Hungary-based carrier fell 22% to EUR13.5m. This news was compounded by the announcement that the company would now reduce its guidance on net profit for the full year by EUR20m, with the expectation that this would now be in the region of EUR225m-EUR235m.

Looking beyond the headline profit figure however, there was still much to like about how Wizz Air has performed over the last quarter.

For the three months ending 31 December, total revenue rose a very respectable 9.9% to EUR341.1m with ticket and ancillary revenues rising 2.5% (EUR191.8m) and 21% (EUR149.4m) respectively. Overall passenger numbers increased by 20.1% to 5.7m -- cementing the £1bn cap's position as the leading budget carrier in Central and Eastern Europe -- while the company's package holiday unit (Wizz Tours) also reported a cracking 306% increase in revenues to EUR3.7m. Crisis? What crisis?

Bargain buy?

While today's cautious tone may concern some investors, I think the initial reaction was overdone. After all, a sharp fall like that seen this morning is usually indicative of serious problems at a single company. For evidence of this, check out the recent share price performance of businesses like BT and Pearson. By contrast, Wizz Air's current problems are either temporary (bad weather) or shared by all airlines (low prices).

While the former is beyond the company's control, I see no reason to doubt its ability to compete with peers such as easyJet(LSE: EZJ), particularly as the former now expects to grow capacity at the higher end of previous guidance (20%) for the 2016/17 financial year. Indeed, with new routes being added (26 in Q3) and a growing fleet of aircraft, I'm left wondering if the company might still surprise the market over the next couple of years.

In addition to the above, Wizz Air also has a long history of generating consistently high levels of return on the capital it invests. Indeed, its most recent figure (25%) is higher than that achieved by its Luton-based peer (13%). With a total cash position of EUR892m at the end of Q3 -- £746.8m of which was free cash -- Wizz's Air balance sheet also continues to be in rude health.

Things get even more tempting when Wizz Air's current valuation is considered. Like the majority of airline stocks, its shares currently trade in bargain territory at just 10 times earnings for 2017 and 2018. An estimated price-to-earnings growth (PEG) ratio of just 0.76 for 2018 makes the investment case even sweeter.

All this before we've even considered the elephant in the room, namely Brexit. Although our impending exit from the EU may continue to weigh on sentiment towards the industry, Wizz Air's lack of dependence on the UK also means that it may not face quite the same headwinds as some of its budget competitors if and when Article 50 is eventually triggered.

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Paul Summers owns shares in easyJet. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.