Are Investors Undervaluing AAR (AIR) Right Now?
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.
One company to watch right now is AAR (AIR). AIR is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 16.88, which compares to its industry's average of 28.68. Over the past 52 weeks, AIR's Forward P/E has been as high as 18.06 and as low as 11.08, with a median of 15.13.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. AIR has a P/S ratio of 1.08. This compares to its industry's average P/S of 2.15.
Finally, we should also recognize that AIR has a P/CF ratio of 18.12. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 44.77. Over the past 52 weeks, AIR's P/CF has been as high as 18.31 and as low as 10.24, with a median of 15.22.
These figures are just a handful of the metrics value investors tend to look at, but they help show that AAR is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, AIR feels like a great value stock at the moment.
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