Should Value Investors Buy AAR (AIR) Stock?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to...
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.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader 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.
AAR (AIR) is a stock many investors are watching right now. AIR is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 13.35, which compares to its industry's average of 21.74. Over the past year, AIR's Forward P/E has been as high as 32.80 and as low as 11.13, with a median of 17.20.
Investors should also recognize that AIR has a P/B ratio of 1.37. The P/B ratio is used to compare a stock's market value with 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 1.80. Within the past 52 weeks, AIR's P/B has been as high as 1.70 and as low as 1.14, with a median of 1.40.
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. AIR has a P/S ratio of 0.78. This compares to its industry's average P/S of 1.71.
Finally, investors should note that AIR has a P/CF ratio of 13.86. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. AIR's P/CF compares to its industry's average P/CF of 27.73. Within the past 12 months, AIR's P/CF has been as high as 76.38 and as low as 11.53, with a median of 19.67.
Value investors will likely look at more than just these metrics, but the above data helps show that AAR is likely undervalued currently. And when considering the strength of its earnings outlook, AIR sticks out at as one of the market's strongest value stocks.
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