Value
4.9/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 4.4 |
| P/S | 9.2 |
| EV/EBITDA | 1.1 |
| Fwd P/E | 5.2 |
| PEG | 6.7 |
| Analyst target | 3.0 |
- ▸Forward P/E: 24.3x
- ▸PEG: 1.07
AIR · Why this verdict
Why AAR (AIR) is rated BUY WAIT
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictBUY WAIT
Overall score5.9/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
AAR Corp. has delivered four consecutive quarterly earnings beats averaging 12% above consensus and is growing at 25% year over year, but a free cash flow conversion of only 16% of net income raises earnings quality concerns, and the stock has reached its near-term price target with essentially no remaining upside at current prices.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Despite strong reported earnings, free cash flow is only 16% of net income — a significant red flag indicating that the majority of reported profit is not converting into cash, which raises questions about working-capital intensity or the sustainability of the earnings margin at this revenue scale. Quality breakdown | Cash quality would improve if free cash flow rises above 50% of net income for two consecutive quarters, demonstrating that the earnings base is translating into genuine cash generation. | →Stable |
| CounterA temporarily low free cash flow to net income ratio in a high-growth services business can reflect front-loaded working-capital investment (inventory for new contract wins, receivables build from rapid revenue expansion) that reverses as contracts mature and collections normalize. | ||
With only 0.7% headroom to the near-term price target of $132.05 and a reward-to-risk ratio of 0.10-to-1, the stock has essentially closed the gap to its near-term resistance level — a setup that offers almost no margin of safety and where a modest adverse move would exceed the entire remaining upside. Price targets | Upside would reopen if the analyst consensus price target rises above $150, giving more than 14% room from the current $131.18, sufficient to reset a constructive risk/reward. | →Stable |
| CounterA stock that has reached its near-term target on genuine fundamental momentum may simply require an upward revision in the target itself rather than a price correction; if earnings continue to surprise positively, analyst price objectives tend to follow the operating performance higher. | ||
The company has beaten consensus earnings estimates in each of the last four quarters with an average positive surprise of roughly 12%, demonstrating a reliable pattern of under-promising and over-delivering that has built credibility with investors over a sustained period. Catalyst breakdown | If this pillar holds, the average quarterly earnings surprise should remain positive and above 5% over the next four quarters, with no miss interrupting the streak. | ↑Improving |
| CounterFour consecutive beats can cause analyst models to ratchet estimates upward aggressively, raising the bar for the next print; the same underlying performance level that produced 12% average upside may generate only in-line results once street expectations have fully absorbed the company's demonstrated run-rate. | ||
Revenue and earnings are growing at 25% year over year, a pace well above the aerospace and defense services sector median, suggesting the company is gaining market share or benefiting from a structural expansion in demand for maintenance and repair services. Growth breakdown | Growth would need to remain at or above 15% year over year for two consecutive quarters to sustain the premium valuation the current momentum implies. | ↓Deteriorating |
| CounterAerospace services revenue is highly correlated with airline fleet utilization and maintenance cycles, which can reverse quickly in a demand downturn; a 25% growth rate driven by pent-up post-pandemic maintenance demand may prove episodic rather than indicative of durable market-share gains. | ||
With the stock trading at $131.18 against an options max pain level of $85 — a 54% premium — and RSI at 74, the options market's expected gravitational center is far below the current price, a divergence that historically creates downward pressure as options expiration approaches. Risk breakdown | This risk would resolve if the options max pain level rises above $120 for two consecutive monthly expirations, indicating that the options market's expectation of equilibrium has caught up with the current trading price. | ↑Improving |
| CounterIn a strongly trending stock with rising volume accumulation, max pain can remain disconnected from the trading price for extended periods; the divergence is a risk to monitor but is not a reliable timing signal on its own for when a correction will occur. | ||
Despite strong reported earnings, free cash flow is only 16% of net income — a significant red flag indicating that the majority of reported profit is not converting into cash, which raises questions about working-capital intensity or the sustainability of the earnings margin at this revenue scale.
→StableQuality breakdown
- Expectation
- Cash quality would improve if free cash flow rises above 50% of net income for two consecutive quarters, demonstrating that the earnings base is translating into genuine cash generation.
CounterA temporarily low free cash flow to net income ratio in a high-growth services business can reflect front-loaded working-capital investment (inventory for new contract wins, receivables build from rapid revenue expansion) that reverses as contracts mature and collections normalize.
With only 0.7% headroom to the near-term price target of $132.05 and a reward-to-risk ratio of 0.10-to-1, the stock has essentially closed the gap to its near-term resistance level — a setup that offers almost no margin of safety and where a modest adverse move would exceed the entire remaining upside.
→StablePrice targets
- Expectation
- Upside would reopen if the analyst consensus price target rises above $150, giving more than 14% room from the current $131.18, sufficient to reset a constructive risk/reward.
CounterA stock that has reached its near-term target on genuine fundamental momentum may simply require an upward revision in the target itself rather than a price correction; if earnings continue to surprise positively, analyst price objectives tend to follow the operating performance higher.
The company has beaten consensus earnings estimates in each of the last four quarters with an average positive surprise of roughly 12%, demonstrating a reliable pattern of under-promising and over-delivering that has built credibility with investors over a sustained period.
↑ImprovingCatalyst breakdown
- Expectation
- If this pillar holds, the average quarterly earnings surprise should remain positive and above 5% over the next four quarters, with no miss interrupting the streak.
CounterFour consecutive beats can cause analyst models to ratchet estimates upward aggressively, raising the bar for the next print; the same underlying performance level that produced 12% average upside may generate only in-line results once street expectations have fully absorbed the company's demonstrated run-rate.
Revenue and earnings are growing at 25% year over year, a pace well above the aerospace and defense services sector median, suggesting the company is gaining market share or benefiting from a structural expansion in demand for maintenance and repair services.
↓DeterioratingGrowth breakdown
- Expectation
- Growth would need to remain at or above 15% year over year for two consecutive quarters to sustain the premium valuation the current momentum implies.
CounterAerospace services revenue is highly correlated with airline fleet utilization and maintenance cycles, which can reverse quickly in a demand downturn; a 25% growth rate driven by pent-up post-pandemic maintenance demand may prove episodic rather than indicative of durable market-share gains.
With the stock trading at $131.18 against an options max pain level of $85 — a 54% premium — and RSI at 74, the options market's expected gravitational center is far below the current price, a divergence that historically creates downward pressure as options expiration approaches.
↑ImprovingRisk breakdown
- Expectation
- This risk would resolve if the options max pain level rises above $120 for two consecutive monthly expirations, indicating that the options market's expectation of equilibrium has caught up with the current trading price.
CounterIn a strongly trending stock with rising volume accumulation, max pain can remain disconnected from the trading price for extended periods; the divergence is a risk to monitor but is not a reliable timing signal on its own for when a correction will occur.
Per-dimension breakdown
Quality
4.2/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 4.0 |
| ROA | 3.7 |
| Gross margin | 0.0 |
| Op margin | 3.0 |
| Net margin | 2.7 |
| Current ratio | 9.1 |
| FCF quality | 1.3 |
| Moat | 6.1 |
| Piotroski F | 7.8 |
- ▸Earnings quality RED FLAG: 16% FCF/NI
- ▸Strong Piotroski F-Score: 7/9
Growth
7.5/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 8.6 |
| EPS growth | 6.5 |
- ▸Strong growth: 25% YoY
Momentum
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 0.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 6.3 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 5.0 |
| Analyst rating | 6.5 |
| Price target | 4.5 |
- ▸Light analyst coverage (5.0) — signal dampened
Insider
7.3/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 10.0 |
| notable moves | 7.0 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
- ▸Institutions accumulating
Peer rank
6.1/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 8.0 |
| quality rank | 5.4 |
| growth rank | 6.6 |
- ▸Attractive P/E vs peers
Technical
4.9/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 2.5 |
| support resistance | 2.9 |
| 52w position | 9.3 |
| gap | 5.0 |
Risk (lower is worse)
6.3/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.0 |
| days to cover | 7.7 |
| volatility | 1.9 |
| beta | 6.6 |
| debt equity | 7.4 |
Catalyst
7.3/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 8.5 |
| news activity | 8.0 |
- ▸Perfect beat streak: 4Q
- ▸Earnings in 0 days
How the verdict was assembled
Engine trigger
Earnings in 0 days. Wait until post-earnings.
Engine technical detail
verdict_path:
L3:NEWS_BLOCK|ENTRY_STICKY:PRIOR_STILL_VIABLEPassed (5)
- MOMENTUM:6.2>=5.5
- INSIDER:OK
- 8K:CLEAN
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- ASYMMETRY:-1.7=NEGATIVE
- EARNINGS_PROXIMITY:0d<=7d
Warning (0)
none
Reward-to-Risk
-1.66
Upside
-15.7%
Downside
9.5%
Sizing output
STARTER
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
A recent news event triggered an L3 news-block on the verdict path. Trigger: Earnings in 0 days. Wait until post-earnings. The 10-dimension scores remain Growth at 7.5 (strongest), but ASYMMETRY:-1.7=NEGATIVE also fails — the news block is the proximate trigger, not the sole driver.
The strongest dimensions are Growth at 7.5, Insider at 7.3, and Catalyst at 7.3; the weakest are Quality at 4.2, Technical at 4.9, and Value at 4.9. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of -1.66 and an engine sizing output of STARTER.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Consistent Earnings Execution
Trip ifEPS surprise falls below 0% for 2 consecutive quarters, ending the current 4-quarter beat streak.
- P2Strong Revenue Earnings Growth
Trip ifRevenue growth falls below 15% year over year for 2 consecutive quarters, indicating the 25% pace has not been sustained.
- P3Free Cash Flow Quality Gap
Trip ifFree cash flow rises above 50% of net income for 2 consecutive quarters, reversing the current 16% conversion ratio.
- P4Exhausted Near Term Upside
Trip ifAnalyst consensus price target rises above $150 from current levels, widening upside beyond 14% from the current $131.18.
- P5Overbought Well Above Max Pain
Trip ifOptions max pain rises above $120 from the current $85 for 2 consecutive monthly expirations, indicating the market's equilibrium price has converged toward the trading level.