AAR (AIR:NYS) Fundamental Valuation Report

Fundamental Valuation Report


Industrials:Aerospace & Defense

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$38.05 (USD) 07/01/2019

Weighted Valuation
$43.49 (USD)

Overall Rating
Undervalued by 14.3%

Valuation Models Analyst Consensus: $53.67 (USD)
(in order of importance) Comparables: $32.73 (USD)
Adjusted Book Value: $34.49 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (AIR:NYS USD)

Price 38.05
Range 37.18 – 38.23
52 week 34.76 – 49.74
Open 37.77
Vol / Avg. 188938/429660
Mkt cap 1.34B
P/E 19.58
Div/yield 0.30/0.01
EPS 0.41
Shares 35.1M
Beta 1.17

Company Description

AAR Corp is engaged in providing products and services to aviation, government, and defense market. It operates in two segments namely Aviation Services and Expeditionary Services. The Aviation Services segment consists of aftermarket support and services businesses that provide spares and maintenance support for aircraft operated by its commercial and government/defense customers. The Expeditionary Services segment consists of businesses that provide products and services supporting the movement of equipment and personnel by the U.S. Department of Defense, foreign governments, and non-governmental organizations. It generates a majority of its revenue from the Aviation Services Segment.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for AIR:NYS

Using a discounted cash flow model we generated an intrinsic value of $22.68 (USD) for AIR:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

AIR:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $22.68 1% 5% 1% 5%
WACC (or Ke) 11.22 $26.56 $19.65
Terminal Growth Rate 3.00 $19.85 $26.30
Tax Rate 0.05 $25.53 $19.84
Cash Flow 202,189,000 $19.65 $25.71
Capital Expenditures -32,620,000 $22.28 $23.08
Long Term Debt 149,800,000 $22.90 $22.47

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $32.73 (USD) for AIR:NYS. We also generated a valuation of $44.04 (USD) using other metrics and comparables.
The comparable companies were AeroVironment (AVAV:NAS), Cubic (CUB:NYS), Esterline Technologies (ESL:NYS), Hexcel (HXL:NYS) and Kaman (KAMN:NYS).

Company AIR:NYS End Date Value
Earnings/Share $1.38 (USD)
Book Value/Share $26.66 (USD)
Sales/Share $54.14 (USD)
Cash Flow/Share $1.11 (USD)
EBITDA/Share $3.60 (USD)
Price Based on Comps Adjustment Factor (%)
$48.46 (USD) -11.9
$73.52 (USD) -78.7
$122.73 (USD) -55.7
$29.80 (USD) -73.5
$60.18 (USD) -24.4
16.52 PE Ratio 65.16 34.85 185.31 52.35 17.32 35.96
1.40 PB Ratio 2.76 3.66 2.10 1.97 3.61 2.46
0.69 PS Ratio 2.27 5.06 1.22 1.77 2.41 0.86
33.67 PCF Ratio 31.45 40.18 77.50 16.87 12.96 9.74
11.90 EV to EBITDA 16.71 23.50 21.77 13.39 12.06 12.81


Using a multiples approach we generated a valuation of  $33.69 (USD) for AIR:NYS

Company AIR:NYS End Date Value
Earnings/Share $1.38 (USD)
Book Value/Share $26.66 (USD)
Sales/Share $54.14 (USD)
Cash Flow/Share $1.11 (USD)
EBITDA/Share $3.60 (USD)
Price Based on Comps Adjustment Factor
$31.15 (USD) 0
$34.51 (USD) 0
$35.78 (USD) 0
$26.19 (USD) 0
$40.80 (USD) 0
Ratios Ratio Average
PE Ratio 22.58
PB Ratio 1.29
PS Ratio 0.66
PCF Ratio 23.62
EV to EBITDA 11.33

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  AIR:NYS for the last 10 years was  1.28

We ran the Adjusted Book Value for  AIR:NYS and generated a book value of  $26.95 (USD)
By multiplying these we get an adjusted valuation of  $34.49 (USD)

Analyst Data

In the Stockcalc database there are 3 analysts that provide a valuation for AIR:NYS. The 3 analysts have a concensus valuation for AIR:NYS for 2019 of $53.67 (USD).


Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
3 0 0 5.0000 Buy 2019-1-4

Current Price: 38.05 USD

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS 2.62 3.04 3.23
# EPS Analysts 3 2 1
Mean Revenue 2,061.40 2,177.10 2,351.60
# Revenue Analysts 3 2 1
Mean Target Price 53.67
Mean Cash Flow 3.20 3.79 4.05
Mean EBITDA 164.60 185.20 196.30
Mean Net Income 83.70 106.40 111.20
Mean Debt Outstanding 120.10 23.70 -50.20
Mean Tax Rate 20.65 23.50
Mean Growth Rate 32.90
Mean Capital Expenditure 25.00 30.00 30.00

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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