Is It Too Late To Consider Buying AAR Corp. (NYSE:AIR)?

While AAR Corp. (NYSE:AIR) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NYSE over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at AAR’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for AAR

What Is AAR Worth?

Great news for investors – AAR is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that AAR’s ratio of 17.3x is below its peer average of 26.05x, which indicates the stock is trading at a lower price compared to the Aerospace & Defense industry. What’s more interesting is that, AAR’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of AAR look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 46% over the next couple of years, the future seems bright for AAR. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? Since AIR is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on AIR for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AIR. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

If you want to dive deeper into AAR, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for AAR and we think they deserve your attention.

If you are no longer interested in AAR, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.