AAR Corp (NYSE: AIR) is currently grappling with a downturn, which may present a compelling buying opportunity for investors willing to leverage their positions. With long-term debt standing at
985.4M and a potential upside of
3.09, savvy investors could capitalize on the stock's current valuation, especially as it trades near its low price of
68.93.
Top Findings
AAR Corp carries $1.08 billion in debt, with a debt-to-equity ratio of 0.16. This suggests the company isn't fully leveraging borrowing to boost profits. However, its current ratio stands at 2.83, indicating strong liquidity and the ability to meet financial obligations as they come due. While the low debt levels might seem conservative, they also mean AAR Corp has room to use debt strategically for growth opportunities that could yield high returns.
AAR Corp financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of AAR Corp, including all of AAR Corp's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of AAR Corp assets, the company is considered highly leveraged. Understanding the
composition and structure of overall AAR Corp debt and outstanding corporate bonds gives a good idea of
how risky the capital structure of a business is and if it is worth investing in it. Please read more on our
technical analysis page.
Understanding AAR Total Liabilities
AAR Corp liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. AAR Corp has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on AAR Corp balance sheet include debt obligations and money owed to different AAR Corp vendors, workers, and loan providers. Below is the chart of AAR short long-term liabilities accounts currently reported on its balance sheet.
You can use AAR Corp
financial leverage analysis tool to get a better grip on understanding its financial position
How important is AAR Corp's Liquidity
AAR Corp
financial leverage refers to using borrowed capital as a funding source to finance AAR Corp ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. AAR Corp financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to AAR Corp's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of AAR Corp's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the
breakdown between AAR Corp's total debt and its cash.
Breaking down the case for AAR Corp
The entity reported the last year's revenue of 2.32
B. Total Income to common stockholders was 45.8
M with profit before taxes, overhead, and interest of 371.3
M.
Liabilities Breakdown
490.2 M
Total Current Liabilities
1.2 B
Non Current Liabilities Total
| Total Current Liabilities | 490.25 Million |
| Liabilities And Stockholders Equity | 2.96 Billion |
| Non Current Liabilities Total | 1.22 Billion |
| Non Current Liabilities Other | 22.52 Million |
In the world of investing, the saying "buy low, sell high" often rings true, and AAR Corp (NYSE: AIR) may present such an opportunity following its recent slump.
With a market capitalization of $2.48 billion and a price-to-sales ratio of 1.07, the stock appears undervalued, especially considering its revenue of $2.32 billion and EBITDA of $203.3 million. However, the company carries a total debt of $1.08 billion, which includes long-term obligations of $985.4 million, raising concerns about its leverage. Despite these challenges, AAR Corp's net income from continuing operations stands at $46.3 million, suggesting that it still generates profit amid its financial pressures. Investors should weigh these factors carefully, as the potential upside of 3.09 could make this a compelling buying opportunity for those willing to take on some risk..
AAR Corp has 60 percent chance to fall below $68 in 30 days
AAR Corp's Treynor ratio of 0.0 indicates that the stock isn't delivering any extra returns for the risks involved, which may concern investors. There's a 60% chance the stock could drop below $68 in the next month, suggesting a cautious approach might be wise. Current market conditions hint at potential volatility, so investors should monitor their holdings closely. AAR Corp shows below-average downside risk, but its Information Ratio of -0.04 and Jensen Alpha of -0.19 signal challenges ahead. Understanding market volatility can help investors make better timing decisions.
Increased volatility during bear markets can significantly affect AAR Corp's stock price, often prompting investors to adjust their portfolios as values decline.Despite the recent slump in AAR Corp's stock, there are compelling reasons to consider this investment. Analysts are optimistic, with a strong buy consensus and four analysts recommending the stock. The naive expected forecast value stands at
70.61, suggesting potential for recovery. With a possible upside price of
73.02, investors might find an attractive entry point, especially if they believe in the company's long-term growth prospects. While the current market conditions may seem challenging, the underlying fundamentals and analyst support could make AAR Corp a stock worth watching closely..
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Ellen Johnson is a Member of Macroaxis Editorial Board. Ellen covers public companies in North America, focusing primarily on valuation and volatility. Six years of experience in predictive investment analytics and risk management.
View Profile This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Ellen Johnson do not own shares of AAR Corp. Please refer to our
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