AAR Corp. (AIR): Evaluating Valuation After $249 Million Equity Raise and Capacity Expansion

AAR (AIR) just completed a follow-on equity offering worth $249 million, selling 3 million shares of common stock. This move provides new capital that could support both growth plans and financial flexibility.

See our latest analysis for AAR.

Shares of AAR have pulled back in the past week but remain up 27.16% year-to-date. The company’s one-year total shareholder return stands at 27.33%. Momentum has been steady rather than explosive, as recent initiatives such as expanding MRO capacity and securing fresh capital signal management’s confidence in the longer-term growth runway.

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The real question for investors now is whether AAR’s shares still offer attractive value given the company’s strong results and analyst optimism, or if the market is already pricing in most of its future potential.

Most Popular Narrative: 13.9% Undervalued

Compared to AAR's last close price of $78.32, the most popular narrative sets a fair value of $91, drawing on a bullish outlook rooted in operational expansion and digital transformation. The current price sits meaningfully below this narrative anchor, inviting investors to scrutinize the assumptions behind such a gap.

The commercialization of additional MRO capacity in Oklahoma City and Miami, both already sold out before opening, positions AAR to capitalize on the expected long-term rise in global air travel and the need for ongoing maintenance of aging aircraft fleets. This supports robust revenue growth and improved earnings visibility. AAR's strong growth in new parts Distribution (25%+ organic, significantly above market) directly aligns with increasing demand for resilient supply chains and more diversified inventory management from both commercial and government customers, indicating sustained future revenue expansion and potential for higher margins.

Read the complete narrative.

Can you spot the engine of this high valuation? One key assumption here involves a forecast for margins and earnings growth that would surprise even seasoned investors. Want to find out what analyst projections are propelling this price target? Dig in to uncover the bold numbers and financial logic that fuel this narrative’s bullish case.

Result: Fair Value of $91 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, rising competition from OEMs and the risk of commercial aviation slowdowns could quickly test the confidence underlying these bullish forecasts.

Find out about the key risks to this AAR narrative.

Another View: Valuation Is Not All Clear Skies

Taking a look at where AAR trades relative to earnings gives us a more cautious perspective. Its current price-to-earnings ratio stands at 107.2x, which is much higher than the US Aerospace & Defense industry average of 38.9x, its peer average of 43.1x, and the market's suggested fair ratio of 51.7x. This signals a valuation premium that could amplify downside risk if growth expectations fall short. Are investors paying too much for the growth story, or could momentum push valuations even higher?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own AAR Narrative

If you see the story differently or want to dive deeper into the numbers on your own terms, shaping your own view takes just a few minutes, so go ahead, Do it your way.

A great starting point for your AAR research is our analysis highlighting 2 key rewards and 4 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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