I don’t plan to make a habit of recommending that investors own companies that lost nearly $8 billion in their most recent fiscal year. But that’s exactly what I’m doing with United Airlines (NASDAQ:UAL) stock.

Obviously, United had a horrific 2020. So did the entire airline sector. The novel coronavirus pandemic shut down the entire industry during the second quarter, and the pandemic’s effects continue to linger.

But one year doesn’t make or break an investment case. That’s particularly true when that year is one of the worst in history (and not just for the airlines).

And it’s particularly true when an investor is looking backward. Good investors look forward. It’s future earnings, after all, that drive the value of a stock.

The fact is that United has a reasonably solid outlook. With UAL stock down by nearly half over the last year, valuation is attractive as well.

UAL is going to take patience. Results for 2020 as a whole, and even the fourth quarter, were awful. But the news is going to get better going forward, and investors still have an opportunity to own the stock before that happens.

Ugly Earnings

There’s no way to sugar-coat it: United’s results were awful.

For the year, total revenue declined 64.5%. Passenger revenue dropped 70%. Obviously, it’s tough to lay the blame for that decline solely at United’s feet, but even in the context of the pandemic those declines are eye-popping.

Profit figures don’t look any better — because there aren’t any profit figures. They’re all losses. On an adjusted basis, United lost $7.7 billion for the full year. That’s half of revenue.

Q4 numbers did show some sequential improvement: revenue increased to $3.4 billion from $2.5 billion in Q3. But the losses still piled up, with an adjusted net loss of $2.08 billion in the fourth quarter against $2.37 billion the quarter before.

That latter figure likely disappointed investors, given that UAL stock sold off by more than 10% in the three trading sessions after the release. Indeed, the Q4 loss was worse than Wall Street projected.

United was cautious toward 2021 as well. Management refused to call the bottom, and guidance for a potential 70% decline in Q1 revenue was slightly worse than one of its peers.

There’s not a lot to like here.

Take a Step Back

But let’s take a step back here and ask two important questions.

First, did any reasonable investor expect anything different? We knew 2020 was going to be ugly. We knew Q4 was going to be ugly, even with a few more passengers willing to take the risk for holiday travel.

Business travel remains crushed, and that travel is more profitable for airlines. (Business travelers tend to focus more on loyalty programs than on price; consumer preferences are generally the reverse.)

United has to get through what is the industry’s darkest period since at least the attacks of Sept. 11, 2001. In that context, it doesn’t really matter if Q1 revenue falls 65% or 68% or 73%. An investor even considering buying UAL stock is buying it for the recovery anyway.

Second, could United have done anything different? Not really. The operating model of the airline industry makes it impossible to cut costs in proportion to revenue declines of this magnitude. There are some quibbles to be had about capital allocation before the pandemic (United certainly could have paid down debt), but it’s not as if the Q4 results or Q1 guidance highlight operational problems.

United is playing the hand it was dealt as well as it can. The problem is it was dealt basically the worst hand there is.

The Case for UAL Stock

So, yes, earnings were ugly. 2021 will be better, but not even United isn’t expecting dramatic improvement any time soon. So why would any investor buy UAL stock?

Because we’re looking to the future — and I don’t mean 2021. We’re looking to a “return to normalcy.” As vaccines are rolled out this year, vacation-starved travelers return, and business demand picks up, United actually might be in a decent position.

For instance, the balance sheet is in surprisingly good shape. United has nearly $20 billion in liquidity (essentially, cash plus easily accessible funding). It expects to end Q1 at roughly the same level.

Even if a recovery takes longer than expected, United has enough cash to get through to the other side.

As far as profits go, United did have one intriguing piece of guidance on the Q4 call. Management believes profit margins will clear 2019 levels by 2023.

That’s not to say that business will return to normal. Rather, thanks to operational improvements and cost-cutting, United can wring out more profit per revenue dollar by 2023.

That’s a big deal in an industry with thin margins. Even in 2019, for example, United’s EBITDA (earnings before interest, taxes, depreciation and amortization) margins were below 16%.

If you take the 3-5 year view, the bull case becomes clear. Bear in mind that United earned $12 per share in 2019. If it can get better margins and, over time, revenue that nears pre-pandemic levels, EPS easily gets back to double-digits.

As I write this, UAL stock trades at $41. If earnings are over $10 per share, it won’t be at $41 a few years now, but rather much, much higher.

On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in the article.