AAR Corp. (NYSE:AIR), which is in the aerospace & defense business, and is based in United States, saw significant share price movement during recent months on the NYSE, rising to highs of US$45.63 and falling to the lows of US$37.66. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether AAR's current trading price of US$40.93 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at AAR’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is AAR worth?
Great news for investors – AAR is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $71.80, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Although, there may be another chance to buy again in the future. This is because AAR’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from AAR?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 29% over the next couple of years, the future seems bright for AAR. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since AIR is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on AIR for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AIR. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on AAR. You can find everything you need to know about AAR in the latest infographic research report. If you are no longer interested in AAR, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.