AAR (AIR:NYS) Fundamental Valuation Report

Fundamental Valuation Report

AAR(AIR:NYS)

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
$18.63 (USD) 09/09/2020

Weighted Valuation
$16.51 (USD)

Overall Rating
Overvalued by 11.4%

Valuation Models Comparables: $16.51 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Undervalued on an Asset Valuation
According to Analyst consensus at $25.33 this stock is Undervalued

Company Overview (AIR:NYS USD)

Price 18.63
Range 18.52 – 19.76
52 week 9.44 – 51.88
Open 19.75
Vol / Avg. 286028/258515
Mkt cap 657.7M
P/E 26.24
Div/yield 0.30/0.01
EPS 0.12
Shares 35.3M
Beta 1.65

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 it’s 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 ($9.54) (USD) for AIR:NYS

Comparables Model

Using similar companies and price based ratios we generated a valuation of $16.51 (USD) for AIR:NYS. We also generated a valuation of $59.62 (USD) using other metrics and comparables.
The comparable companies were Mercury Systems (MRCY:NAS), Moog (MOG.A:NYS), Smith & Wesson Brands (SWBI:NAS), VSE (VSEC:NAS) and Kratos Defense & Security (KTOS:NAS).

Company AIR:NYS End Date Value
Earnings/Share $0.12 (USD)
Book Value/Share $25.57 (USD)
Sales/Share $59.20 (USD)
Cash Flow/Share ($1.03) (USD)
EBITDA/Share $2.38 (USD)
Price Based on Comps Adjustment Factor (%)
$3.55 (USD) -12.3
$53.05 (USD) -79.8
$77.84 (USD) -61.9
($19.17) (USD) -68.2
$46.68 (USD) -18.1
AIR:NYS Ratios Used Average Values MRCY:NAS MOG.A:NYS SWBI:NAS VSEC:NAS KTOS:NAS
26.24 PE Ratio 172.25 44.11 15.02 0.00 288.20 341.68
0.73 PB Ratio 2.08 2.78 1.58 2.17 0.93 2.91
0.31 PS Ratio 2.00 4.76 0.70 1.13 0.43 3.00
0.00 PCF Ratio 31.38 32.93 8.55 4.53 8.66 102.26
10.63 EV to EBITDA 19.59 25.60 9.72 13.94 13.23 35.46

Multiples

Using a multiples approach we generated a valuation of  $25.89 (USD) for AIR:NYS

Company AIR:NYS End Date Value
Earnings/Share $0.12 (USD)
Book Value/Share $25.57 (USD)
Sales/Share $59.20 (USD)
Cash Flow/Share ($1.03) (USD)
EBITDA/Share $2.38 (USD)
Price Based on Comps Adjustment Factor
$2.48 (USD) 0
$34.79 (USD) 0
$38.88 (USD) 0
$0.00 (USD) 0
$27.43 (USD) 0
Ratios Ratio Average
PE Ratio 20.64
PB Ratio 1.36
PS Ratio 0.66
PCF Ratio 25.74
EV to EBITDA 11.51

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  AIR:NYS for the last 10 years was  1.27

We ran the Adjusted Book Value for  AIR:NYS and generated a book value of  $25.72 (USD)
By multiplying these we get an adjusted valuation of  $32.77 (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 2021 of $25.33 (USD).

AIR:NYS AAR

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
3 0 0 5.0000 Buy 2020-9-8

Current Price: 18.63 USD

Analyst Consensus
USD Millions 2021 2022
Mean EPS 0.62 1.86
# EPS Analysts 3 2
Mean Revenue 1,834.90 1,904.60
# Revenue Analysts 3 1
Mean Target Price 25.33
Mean Cash Flow 7.29 4.85
Mean EBITDA 40.70 138.70
Mean Net Income 9.20 65.10
Mean Debt Outstanding 163.80 85.60
Mean Tax Rate 24.00 24.00
Mean Growth Rate -14.30
Mean Capital Expenditure 18.80 17.50

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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