StandardAero (SARO): Assessing Valuation After Truist’s Buy Rating Sparks Investor Interest

StandardAero (SARO) shares caught the eye of investors following Truist Financial's recent initiation of coverage with a buy rating. This move tends to spark fresh interest and closer scrutiny in the market.

See our latest analysis for StandardAero.

After a steady run-up earlier this year, StandardAero’s shares have pulled back from recent highs, with a 12.4% decline over the past 90 days. Despite this short-term weakness, the stock’s year-to-date share price return stands at a robust 7.7%. This suggests momentum has cooled, but investors are still ahead for 2025 even as the one-year total shareholder return remains negative.

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With the stock trading at a notable discount to analyst price targets but still showing strong annual growth, investors must decide whether StandardAero is undervalued at current levels or if the market is already pricing in its next phase of growth.

Price-to-Earnings of 66.4x: Is it Justified?

StandardAero commands a notably high price-to-earnings (P/E) ratio of 66.4x at its last close of $26.42, putting it on the expensive side compared to peers and sector norms.

The price-to-earnings ratio gauges how much investors are willing to pay for each dollar of net income, making it a useful lens to compare profit expectations across aerospace and defense companies. In this case, the market is assigning a strong premium to StandardAero’s recent profitability turnaround and anticipated earnings growth.

However, StandardAero’s P/E of 66.4x is higher than both the peer average (65.1x) and the US Aerospace & Defense industry average (38.9x). Relative to our estimate of its fair P/E (35.7x), the company appears richly valued, suggesting a level of optimism not fully justified by current fundamentals.

Explore the SWS fair ratio for StandardAero

Result: Price-to-Earnings of 66.4x (OVERVALUED)

However, slower revenue growth or a further pullback in share price could challenge the case for StandardAero’s current valuation premium.

Find out about the key risks to this StandardAero narrative.

Another View: SWS DCF Model Suggests Undervaluation

Taking a different angle, our DCF model estimates StandardAero’s fair value at $29.29, which is around 9.8% above its current price. This method points to potential undervaluation, even as traditional ratios suggest otherwise. Which approach will play out for investors in the months ahead?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out StandardAero for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own StandardAero Narrative

If you see StandardAero’s story differently, or want to dig into the numbers firsthand, you can quickly craft your own perspective in just a few minutes using our tools. Do it your way.

A great starting point for your StandardAero research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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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.

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