Aar Corp (NYSE: AIR)

Sector: Industrials Industry: Aerospace & Defense CIK: 0000001750
Market Cap 3.54 Bn
P/B 2.27
P/E 37.61
P/S 1.19
ROIC (Qtr) 7.95
Div Yield % 0.00
Rev 1y % (Qtr) 15.92
Total Debt (Qtr) 1.04 Bn
Debt/Equity (Qtr) 0.67

About

AAR CORP (AIR), a prominent player in the aviation aftermarket industry, boasts an extensive range of solutions designed to cater to the global aviation sector. The company operates through four primary segments: Parts Supply, Repair & Engineering, Integrated Solutions, and Expeditionary Services. The Parts Supply segment, responsible for approximately 41% of the company's fiscal 2024 sales, specializes in the distribution of new, original equipment manufacturer (OEM)-supplied replacement parts and used serviceable material (USM). AAR CORP has...

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Price action

Investment thesis

Bull case

  • Tangible assets of 2.39B provide robust 9.49x coverage of other current liabilities 252.40M, indicating strong asset backing.
  • Retained earnings of 1.04B provide strong 4.11x coverage of other current liabilities 252.40M, indicating earnings quality.
  • Cash reserves of 96.20M provide solid 2.25x coverage of other non-current liabilities 42.80M, indicating strong liquidity.
  • Cash reserves of 96.20M provide comfortable 4.54x coverage of tax obligations 21.20M, showing strong fiscal management.
  • Retained earnings of 1.04B represent substantial 0.67x of equity 1.56B, indicating strong internal capital generation.

Bear case

  • Operating cash flow of 1.40M barely covers its investment activities of (213.20M), with a coverage ratio of -0.01, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • With cash reserves of 96.20M against inventory of 910.80M, the 0.11 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Cash reserves of 96.20M provide limited coverage of acquisition spending of (179.10M), which is -0.54x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • The company's operating cash flow of 1.40M shows concerning coverage of stock compensation expenses of 19.50M, with a 0.07 ratio indicating potential earnings quality issues.
  • Free cash flow of (33.20M) provides weak coverage of capital expenditures of 34.60M, with a -0.96 ratio suggesting additional external financing needs for growth initiatives.

Segments Breakdown of Revenue (2025)

Segments Breakdown of Revenue (2025)

Peer comparison

Companies in the Aerospace & Defense
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 GE General Electric Co 342.94 Bn 42.54 7.80 20.84 Bn
2 RTX RTX Corp 252.05 Bn 38.24 2.93 40.71 Bn
3 BA Boeing Co 174.43 Bn -17.16 2.16 53.35 Bn
4 LMT Lockheed Martin Corp 126.61 Bn 30.15 1.73 22.19 Bn
5 GD General Dynamics Corp 95.62 Bn 22.69 1.86 8.01 Bn
6 NOC Northrop Grumman Corp /De/ 89.30 Bn 22.22 2.18 16.96 Bn
7 HWM Howmet Aerospace Inc. 88.16 Bn 60.80 11.05 3.19 Bn
8 TDG TransDigm Group INC 80.97 Bn 43.39 9.17 30.02 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.40 3.58
EV to Cash from Ops. EV/CFO 3,248.12 58.38
EV to Debt EV to Debt 4.35 98.04
EV to EBIT EV/EBIT 21.99 19.42
EV to EBITDA EV/EBITDA 13.73 33.60
EV to Free Cash Flow [EV/FCF] EV/FCF -136.97 91.66
EV to Market Cap EV to Market Cap 1.28 1.13
EV to Revenue EV/Rev 1.53 11.27
Price to Book Value [P/B] P/B 2.27 4.81
Price to Earnings [P/E] P/E 37.61 31.79
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.00 -3.75
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 22.95
Dividend per Basic Share Div per Share (Qtr) 0.00 0.70
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 14.15
Interest Coverage Int. cover (Qtr) 2.75 -18.00
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -17.29 -50.32
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 16.61 1,609.43
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 0.75
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 385.85 -30.98
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 116.19 10.65
EBIT Growth (1y) % EBIT 1y % (Qtr) 95.46 -26.90
EBT Growth (1y) % EBT 1y % (Qtr) 260.55 -27.25
EPS Growth (1y) % EPS 1y % (Qtr) 821.43 -99.21
FCF Growth (1y) % FCF 1y % (Qtr) -276.60 6.61
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 18.43 -5.55
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.92 0.51
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.07
Cash Ratio Cash Ratio (Qtr) 0.16 1.76
Current Ratio Curr Ratio (Qtr) 2.85 3.72
Debt to Equity Ratio Debt/Equity (Qtr) 0.67 0.07
Interest Cover Ratio Int Coverage (Qtr) 2.75 -18.00
Times Interest Earned Times Interest Earned (Qtr) 2.75 -18.00
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 8.90 -345.84
EBIT Margin % EBIT Margin % (Qtr) 6.97 -382.63
EBT Margin % EBT Margin % (Qtr) 4.43 -387.93
Gross Margin % Gross Margin % (Qtr) 19.30 -33.31
Net Profit Margin % Net Margin % (Qtr) 3.20 -389.13