Does AAR’s Strong Multi Year Rally Still Leave Upside in 2025?

• If you have been wondering whether AAR is still a buy after its strong run, you are not alone. This breakdown is designed to help you decide if the current price truly lines up with its fundamentals.
• The stock has climbed 34.6% year to date and 21.2% over the last year, with a hefty 79.4% gain over three years and 141.8% over five years. The last month was slightly softer with a -1.6% move and a flat 0.4% over the past week.
• Recent attention on AAR has focused on its role in supporting global aviation and defense supply chains, as airlines and governments continue investing in maintenance and parts to keep fleets flying reliably. At the same time, investors have been watching how the company positions itself for long term demand in aircraft maintenance and logistics. This helps explain why sentiment around the stock has stayed relatively constructive despite short term noise.
• On our framework, AAR currently earns a valuation score of 2 out of 6, suggesting it only looks undervalued on a couple of checks. Next we will unpack what different valuation methods say about that score and, by the end, explore an even more insightful way to judge whether the stock is truly good value.

AAR scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: AAR Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth by projecting its future cash flows and then discounting them back to today in dollar terms. For AAR, the latest twelve month free cash flow is about $27.3 million and negative, but analysts expect this to turn positive and increase over the coming years.

Based on a 2 Stage Free Cash Flow to Equity model using analyst forecasts and longer term extrapolations by Simply Wall St, AAR’s free cash flow is projected to reach roughly $588.5 million by 2035. When all projected cash flows over the next decade are discounted back, the intrinsic value for AAR is estimated at about $182.05 per share.

This implies the stock is trading at a 54.5% discount to its estimated fair value, indicating that the market may not be fully pricing in the expected improvement in cash generation and long term growth.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests AAR is undervalued by 54.5%. Track this in your watchlist or portfolio, or discover 925 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for AAR.

Approach 2: AAR Price vs Earnings

For profitable companies like AAR, the price to earnings ratio is a useful way to gauge how much investors are willing to pay today for each dollar of current earnings. A higher PE usually reflects stronger expected growth or lower perceived risk, while a lower PE can signal either weaker prospects or a market that is overly cautious. In simple terms, the faster a company is expected to grow and the more reliable its earnings look, the higher its “normal” or “fair” PE ratio should be.

AAR currently trades on a PE of about 113.46x, which is well above both the Aerospace and Defense industry average of roughly 37.55x and the peer group average of around 53.82x. Simply Wall St’s proprietary “Fair Ratio” for AAR is 53.13x, which estimates the PE the company should trade on after adjusting for its earnings growth outlook, profit margins, industry, market cap and specific risks. This Fair Ratio is more informative than a simple comparison to peers, because it tailors the benchmark to AAR’s own fundamentals rather than assuming it should look exactly like the average company in its sector.

Comparing AAR’s actual PE of 113.46x to its Fair Ratio of 53.13x suggests the shares are pricing in far more optimism than its fundamentals justify at this stage.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1441 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your AAR Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives: simple stories that connect your view of AAR’s business drivers to a financial forecast and a Fair Value estimate. You can then constantly update that view as new news or earnings arrive. This allows you to compare Fair Value with today’s price to inform your decision on whether to buy or sell. It also allows you to see, for example, how one investor might build a bullish AAR narrative around expanding MRO capacity, digital platforms like Trax and long term government contracts that justify a higher fair value than the current $92.25 consensus. Another investor may focus on OEM competition, aviation cyclicality and execution risk to reach a much lower fair value, with both perspectives clearly linked back to their assumed future revenue, earnings and margins.

Do you think there's more to the story for AAR? Head over to our Community to see what others are saying!

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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