Aircastle Limited (NYSE:AYR), which is in the trade distributors business, and is based in United States, led the NYSE gainers with a relatively large price hike in the past couple of weeks. 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 examine Aircastle’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Aircastle still cheap?Good news, investors! Aircastle is still a bargain right now. 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 Aircastle’s ratio of 6.52x is below its peer average of 13.3x, which suggests the stock is undervalued compared to the Trade Distributors industry. What’s more interesting is that, Aircastle’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 Aircastle look like?Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with a negative profit growth of -5.4% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Aircastle. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although AYR is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to AYR, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on AYR for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Aircastle. You can find everything you need to know about Aircastle in the latest infographic research report. If you are no longer interested in Aircastle, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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If you spot an error that warrants correction, please contact the editor at email@example.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.