Assessing Air Lease Stock After 32.6% Jump on Rising Aircraft Demand

If you are debating what to do with your Air Lease shares, or wondering if now is the time to jump in, you are not alone. The stock has been catching the eye of both seasoned investors and newcomers thanks to a remarkable multi-year climb. Although Air Lease's price barely budged over the last month, up just 0.1%, a look farther back paints a much more exciting picture: a 32.6% surge since the start of the year, 43.7% growth over the past twelve months, and a striking 141% gain over the last five years.

What is driving these returns? Much of the recent optimism can be traced to the global recovery in commercial air travel, increased demand for leased aircraft, and positive shifts in regulatory frameworks that have reduced perceived risks in the sector. Industry headlines highlighting expanded order books and strategic partnerships seem to have reinforced confidence that Air Lease’s business model is as resilient as ever.

Still, for investors who care about value, the key question is whether the current price tag reflects Air Lease's fundamentals or if there is still upside to be found. Our latest analysis gives Air Lease a valuation score of 3 out of 6, meaning it passes about half of the standard undervaluation checks. Before you make your next move, let’s break down those valuation approaches in detail, and stick around because there is an even more insightful angle to consider at the end.

Air Lease delivered 43.7% returns over the last year. See how this stacks up to the rest of the Trade Distributors industry.

Approach 1: Air Lease Dividend Discount Model (DDM) Analysis

The Dividend Discount Model (DDM) is designed to estimate the true worth of a stock by projecting future dividends and discounting those payments back to their present value. In Air Lease's case, this model uses the company’s current dividend per share of $0.89, which represents a payout ratio of 22.2% and is supported by a return on equity of 7.8%.

Growth assumptions play a central role in the DDM result here. The expected growth rate for dividends is capped at a reasonable 3.08%, reduced from a previous assumption of 6.05% in light of sector trends and company guidance. These projections are designed to reflect sustainable, long-term dividend expansion rather than short-term spikes, so the focus is on stability rather than aggressive growth.

After running these numbers, the DDM produces an intrinsic value of $15.25 per share for Air Lease. With the actual share price significantly higher, the model implies the stock is currently trading at a 316.9% premium to its theoretical fair value. This indicates that, based on dividends alone, the market is overvaluing Air Lease by a considerable margin.

Result: OVERVALUED

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

Our Dividend Discount Model (DDM) analysis suggests Air Lease may be overvalued by 316.9%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Air Lease Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies like Air Lease because it directly relates what investors are paying for each dollar of current earnings. This makes it a practical tool for comparing established businesses that have steady profit streams.

What makes a "normal" or "fair" PE ratio can vary, as it is shaped by factors like a company’s growth prospects and its risk profile. Companies expected to grow faster or that have lower risk typically trade at higher PE ratios, while slower-growing or riskier firms usually deserve a discount.

Currently, Air Lease is trading at a PE ratio of just 7.70x. For context, the average PE for its Trade Distributors industry is 22.57x, and its peer group averages an even loftier 27.87x. On the surface, this suggests Air Lease is comparatively inexpensive based on earnings.

However, Simply Wall St’s proprietary “Fair Ratio” model dives deeper, factoring in not just industry averages and peers, but also Air Lease’s growth rates, profit margins, risks, and size. For Air Lease, the Fair Ratio is calculated at 12.59x. This provides a more tailored benchmark, reflecting the company’s unique characteristics rather than broad group averages.

Comparing the Fair Ratio of 12.59x to Air Lease's actual PE of 7.70x reveals the stock is trading at a noticeable discount. This confirms it is undervalued based on this earnings multiple approach.

Result: UNDERVALUED

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

Upgrade Your Decision Making: Choose your Air Lease Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let's introduce you to Narratives. Narratives are a simple but powerful tool allowing investors to articulate their own story for Air Lease by connecting their expectations for future revenue, profit margins, risks, and fair value with the company’s real-world developments. Unlike static models, Narratives link Air Lease’s unique business story to a living financial forecast, making it easy to compare your fair value to today’s price and decide whether to buy or sell.

Available to millions of investors on Simply Wall St’s Community page, Narratives are dynamic and update automatically whenever new earnings, news, or other influential data is released. This ensures your investment thesis stays relevant. Different investors often see Air Lease’s future differently. For example, the most bullish Narrative currently values shares as high as $72.00 by 2028, while the most bearish sees fair value nearer to $50.00, each based on differing views about growth, margins, and market conditions.

With Narratives, you can easily track how fresh information impacts your thesis and compare it to the broader community, making them one of the most practical ways to guide your investment decision process.

Do you think there's more to the story for Air Lease? Create your own Narrative to let the Community know!

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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