Value
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 5.8 |
| P/S | 9.5 |
| EV/EBITDA | 3.3 |
| Fwd P/E | 7.6 |
| PEG | 10.0 |
| Analyst target | 7.5 |
- ▸Forward P/E: 16.2x
- ▸PEG: 0.49
- ▸Attractively valued
AIR · Why this verdict
Why AAR (AIR) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results. How we score · Editorial policy
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VerdictSELL
Overall score5.6/10
ConfidenceMEDIUM
MacroRISK_OFF
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
AAR beat EPS estimates in all 4 recent quarters, with an average surprise of 12.1%, and all 12 quarters in the extended history. Avg surprise pct | EPS surprise stays positive at the January 2027 report and beyond. | →Stable |
| CounterBeats against low estimates may reflect conservative analyst models, and the beat margins could shrink as estimates catch up. | ||
Revenue grew 24% YoY, with the August 2026 quarter at $918M versus $739.6M a year earlier. Growth breakdown | Quarterly revenue stays above $890M, near the $894M next-quarter estimate. | →Stable |
| CounterThe latest quarter ($918M) is below the prior one ($928M), and next-quarter estimates imply a further sequential decline. | ||
The $100.26 price sits 31.0% below the $131.32 analyst target, with downside to the stop of 9.5% and reward-to-risk of 3.25. Estimated upside | Price moves toward the $131 target as earnings continue to beat. | →Stable |
| CounterLight analyst coverage of about 4 analysts dampens the signal, and the target may be stale or overly optimistic. | ||
Earnings quality is flagged with free cash flow at only 17% of net income, and the quality score is 4.4, below average. Quality breakdown | Free cash flow to net income recovers above 50% over 12 months. | →Stable |
| CounterWorking-capital build to support rapid growth in a parts and services business can depress free cash flow temporarily and reverse. | ||
Commercial customers including major airlines make up 72.1% of revenue, a high-severity concentration risk. Bear case | Commercial share of revenue falls below 70% as government work grows. | ↓Deteriorating |
| CounterAirline demand is cyclical, and a downturn in air travel would hit most of AAR's revenue at once. | ||
AAR beat EPS estimates in all 4 recent quarters, with an average surprise of 12.1%, and all 12 quarters in the extended history.
→StableAvg surprise pct
- Expectation
- EPS surprise stays positive at the January 2027 report and beyond.
CounterBeats against low estimates may reflect conservative analyst models, and the beat margins could shrink as estimates catch up.
Revenue grew 24% YoY, with the August 2026 quarter at $918M versus $739.6M a year earlier.
→StableGrowth breakdown
- Expectation
- Quarterly revenue stays above $890M, near the $894M next-quarter estimate.
CounterThe latest quarter ($918M) is below the prior one ($928M), and next-quarter estimates imply a further sequential decline.
The $100.26 price sits 31.0% below the $131.32 analyst target, with downside to the stop of 9.5% and reward-to-risk of 3.25.
→StableEstimated upside
- Expectation
- Price moves toward the $131 target as earnings continue to beat.
CounterLight analyst coverage of about 4 analysts dampens the signal, and the target may be stale or overly optimistic.
Earnings quality is flagged with free cash flow at only 17% of net income, and the quality score is 4.4, below average.
→StableQuality breakdown
- Expectation
- Free cash flow to net income recovers above 50% over 12 months.
CounterWorking-capital build to support rapid growth in a parts and services business can depress free cash flow temporarily and reverse.
Commercial customers including major airlines make up 72.1% of revenue, a high-severity concentration risk.
↓DeterioratingBear case
- Expectation
- Commercial share of revenue falls below 70% as government work grows.
CounterAirline demand is cyclical, and a downturn in air travel would hit most of AAR's revenue at once.
Per-dimension breakdown
Quality
4.4/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 4.3 |
| ROA | 3.7 |
| Gross margin | 0.0 |
| Op margin | 3.2 |
| Net margin | 2.8 |
| Current ratio | 9.5 |
| FCF quality | 1.4 |
| Moat | 6.1 |
| Piotroski F | 8.9 |
- ▸Earnings quality RED FLAG: 17% FCF/NI
- ▸Strong Piotroski F-Score: 8/9
Growth
5.7/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 8.5 |
| EPS growth | 2.9 |
- ▸Strong growth: 24% YoY
Momentum
5.8/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.0 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 5.2 |
| Volume | 0.0 |
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA but MA still rising (+1.7%/30d) — pullback in uptrend, not confirmed weakness
Sentiment
6.3/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 4.8 |
| Analyst rating | 5.0 |
| Price target | 9.4 |
- ▸Analyst upside: 47%
Insider
4.1/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 4.5 |
| insider conviction | 2.0 |
| holder change | 5.9 |
- ▸Modest insider selling — $4,288,546 (0.098% of mkt cap)
Peer rank
5.6/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 8.5 |
| quality rank | 5.1 |
| growth rank | 5.3 |
- ▸Attractive P/E vs peers
Technical
3.0/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 2.0 |
| support resistance | 3.2 |
| 52w position | 3.7 |
Risk (lower is worse)
4.5/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.3 |
| days to cover | 7.8 |
| volatility | 0.9 |
| put call | 0.0 |
| implied vol | 2.8 |
| beta | 6.5 |
| debt equity | 7.6 |
| news risk | 3.5 |
- ▸Elevated put/call: 3.00
- ▸High IV: 63%
- ▸Concentration risks: 1 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
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
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:5.8>=5.5
- ASYMMETRY:1.8>=1.5
- INSIDER:OK
- EARNINGS_PROXIMITY:61d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (0)
none
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
1.77
Upside
+24.6%
Downside
13.9%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — MCap $4.4B<$5B
Investment implication
The F-path SELL output reflects an overall score of 4.4 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Value at 7.5) was not enough to lift the adjusted overall above the threshold. Current asymmetry R:R is 1.77 — supplementary context, not the trigger for this path.
The strongest dimensions are Value at 7.5, Catalyst at 7.3, and Sentiment at 6.3; the weakest are Technical at 3.0, Insider at 4.1, and Quality at 4.4. The V9 engine cleared all gates with 1 warning, producing an asymmetric reward-to-risk of 1.77 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Consistent Earnings Beats
Trip ifEPS surprise stays below 0% for 2 consecutive quarters.
- P2Double Digit Revenue Growth
Trip ifQuarterly revenue falls below $850M for 2 consecutive quarters.
- P3Analyst Upside To Target
Trip ifAnalyst target falls below $110, cutting upside to less than 10% from current 31%.
- P4Weak Cash Conversion
Trip ifFree cash flow to net income stays below 20% for 4 consecutive quarters.
- P5Airline Customer Concentration
Trip ifCommercial customer share of revenue exceeds 80% from current 72.1%.