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Is AerCap (AER) Stock Undervalued Right Now?

Zacks Equity Research

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

AerCap (AER) is a stock many investors are watching right now. AER is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock holds a P/E ratio of 7.01, while its industry has an average P/E of 7.63. Over the past year, AER's Forward P/E has been as high as 8.69 and as low as 5.58, with a median of 7.29.

Another valuation metric that we should highlight is AER's P/B ratio of 0.88. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 0.90. Within the past 52 weeks, AER's P/B has been as high as 0.98 and as low as 0.61, with a median of 0.84.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. AER has a P/S ratio of 1.57. This compares to its industry's average P/S of 1.6.

Finally, investors will want to recognize that AER has a P/CF ratio of 2.66. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. AER's current P/CF looks attractive when compared to its industry's average P/CF of 2.74. Over the past year, AER's P/CF has been as high as 3.24 and as low as 2.05, with a median of 2.63.

These figures are just a handful of the metrics value investors tend to look at, but they help show that AerCap is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, AER feels like a great value stock at the moment.


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