Does Aircastle Limited’s (NYSE:AYR) August Stock Price Reflect Its Future Growth?

Aircastle Limited (NYSE:AYR) is considered a high growth stock. However its last closing price of $19.93 left investors wondering whether this growth has already been factored into the share price. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

See our latest analysis for Aircastle

What can we expect from Aircastle in the future?

Investors in Aircastle have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. Expectations from 8 analysts are certainly positive with earnings per share estimated to surge from current levels of $2.707 to $2.964 over the next three years. This results in an annual growth rate of 13%, on average, which signals a market-beating outlook in the upcoming years.

Is AYR’s share price justified by its earnings growth?

Stocks like Aircastle, with a price-to-earnings (P/E) ratio of 7.36x, always catch the eye of investors on the hunt for a bargain. In isolation, this metric can be a bit too simplistic but in comparison to benchmarks, it tells us that AYR is undervalued relative to the current US market average of 17.29x , and undervalued based on its latest annual earnings update compared to the Trade Distributors average of 14.83x .

NYSE:AYR Price Estimation Relative to Market, August 8th 2019
NYSE:AYR Price Estimation Relative to Market, August 8th 2019

Aircastle’s price-to-earnings ratio stands at 7.36x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. But, to be able to properly assess the value of a high-growth stock such as Aircastle, we must incorporate its earnings growth in our valuation. The PEG ratio is a great calculation to take account of growth in the stock’s valuation. A PE ratio of 7.36x and expected year-on-year earnings growth of 13% give Aircastle a very low PEG ratio of 0.56x. This means that, when we account for Aircastle’s growth, the stock can be viewed as relatively cheap , based on fundamental analysis.

What this means for you:

AYR’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Are AYR’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has AYR been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of AYR’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.