Simple Concepts Research Group

Value Investors Are Buying Stock In This Aircraft Parts Company

by | Nov 2, 2021 | Stock Picks

AerSale Corp. (ASLE) Company Overview & Stock Price Forecast

This article provides a brief analysis and stock rating for AerSale (ASLE) including an updated stock price target for October 2021. Additional data on the company’s earnings yield, price/earnings ratio, return on invested capital and YTD performance are discussed as well.

AerSale Fundamentals

ASLE Stock Rating

Stock Price Target: $29.53

In the section below, we discuss the earnings yield, P/E, return on invested capital and YTD performance for AerSale Corporation in comparison to the Retail Distributors industry and the S&P 500.

AerSale is a Small Cap company with a Market Cap of $849.7M.

How are investors using AerSales’ earnings yield to assess the company?

AerSale Corp (ASLE stock)_ Earnings Yield in Comparison to the Retail Distributor Industry, S&P 500 and 10 Year Treasury Rate

The earnings yield is used to show the percentage of a company’s earnings per share. Investors typically use earnings yield to determine which assets are underpriced or overpriced relative to other variables, like sector, industry or bond yields. Simply put, the earnings yield of a company can be used to assess how expensive a company is in relation to the earnings that are generated. When valuing companies, the SIS Research Group does not utilize the inverse P/E ratio to calculate the earnings yield. Instead, we use an adjusted earning yield calculation to capture variation amongst companies (i.e. debt and tax rates).

The current earnings yield for AerSale is 43.47%%, in comparison to 3.49% for the S&P 500 and 1.66% for the 10-year treasury bond. The median earnings yield for the Retail Distributor industry is 6.41%.

What does AerSale Price-to-Earnings Ratio (P/E) tell investors about the company?

AerSale Corp (ASLE stock)_ Price-to-Earnings, Price-to-Sales and Price-to-Book Value in Comparison to the Retail Distributors Industry and the S&P 500

The price-to-earnings ratio (P/E) is a relatively popular metric used by investors and analysts for valuing a company’s stock. The P/E ratio can be used to show how a stock’s valuation compares to other companies and the total market. Investors use the P/E ratio to determine what the market is willing to pay today based on a company’s past or future earnings. A high P/E ratio could mean that a stock’s price is too high relative to earnings, which could be a signal that a stock is currently overvalued. In turn, a low P/E ratio could indicate that a company’s current stock price is low relative to earnings. 

AerSale is currently trading at a P/E of 2.30. The P/E for the Retail Distributors industry is 33.20 and the P/E for the S&P 500 is 28.63.

What is the current Price-to-Sales Ratio (P/S) for AerSale?

The Price-to-Sales Ratio (P/S) looks at a company’s market cap and revenue to determine valuation. The P/S ratio is calculated by taking a company’s market cap and dividing by the total sales or revenue. The P/S ratio gives an idea of how much the market values every dollar of a company’s sales and can be effective in valuing unprofitable growth stocks or companies that are currently undergoing special situations or challenges. A lower the P/S ratio can be an indicator of good value.

AerSale is currently trading at a P/S of 0.10. The P/S for the Retail Distributors industry is 1.06 and the P/S for the S&P 500 is 3.11.

How does AerSale Price-to-BookRatio (P/B) compare to the Retail Distributors industry?

Price-to-book value (P/B) is the ratio of the market value of a company’s shares divided by its book value of equity (the value of it’s assets on the books). The book value is the difference between the book value of assets and liabilities. Typically, investors use the P/B ratio to assess if a stock is valued properly (a value of one means that the stock price is trading in line with the book value of the company). A company with a high P/B ratio could mean the stock price is overvalued as well as the converse.

AerSale P/B ratio is 2.19. The P/B for the Retail Distributors industry is 3.39 and the P/B for the S&P 500 is 4.84.

How attractive is AerSales’ Return on Invested Capital (ROIC) to investors?

AerSale Corp (ASLE)_ Return on Invested Capital in Comparison to the Retail Distributors Industry and the S&P 500

Investors use the return on invested capital (ROIC) to assess how efficient a company is at turning capital into profits. The ROIC is the amount of money a company makes on it’s investments that is above the average cost of debt and equity.

Investors can use the ROIC to provide context for metrics like the (P/E) ratio. For instance, when used in isolation a low P/E ratio could suggest a company is oversold but the decline could be because a company is no longer generating value for shareholders. Conversely, companies that consistently generate high rates of ROIC can plausibly trade at a premium compared to other stocks, even if their P/E ratios are high.

AerSale ROIC is currently 9.73% in comparison to 11.67% for the Retail Distributor industry and 8.60% for the S&P 500.

What is AerSale YTD Performance in comparison to its industry and the total market?

The year-to-date (YTD) performance is the amount of profit/loss realized by a stock since the first trading day of the current calendar year. 

The YTD performance for AerSale is 43.85%. The Retail Distributor industry has a YTD performance of 49.22% in comparison to the YTD S&P 500 performance of 21.19%.

AerSale Corp (ASLE)_ YTD Performance in Comparison to the Retail Distributors Industry and the S&P 500

Recent Financial Results

  • Revenue of $91M in Q2 (Q1 2020 revenue of $58.4M)
  • Q2 EBITDA of $30.4M (33.1% of revenue) compared to $12.9M (28.4% of revenue) in Q2 2020
  • Q2 net income of $16.5M (18.0% of revenue) compared to loss of $7.9M in the Q2 2020
  • Increased TechOps revenue of 29% to $31.6M for Q2 2021, driven by storage and recommissioning of aircraft at MRO facilities
  • Increased 2021 revenue projection of $340-360M in comparison to 2020 revenue of $208.9M

Stock Price Target: $29.53

Company Overview

ASLE Stock Rating

AerSale Corporation provides aftermarket commercial aircraft, engines, and parts to passenger and cargo airlines, leasing companies, and defense contractors. The company also operates a network of maintenance and repair (MRO) service providers worldwide. Aersale operates mainly in 2 segments: Asset Management Solutions and Technical Operations (TechOps).

Asset Management Solutions: focuses on the sale and lease of aircraft, engines, and airframes in addition to disassembly of component parts.

TechOps: provides internal and third-party aviation services, including internally developed engineered solutions, heavy aircraft maintenance and modification. TechOps also provides storage and disassembly services.

For 2021, the company anticipates revenue of $340–$360 million based on the increased demand for the Asset Management Solutions segment. AerSale also anticipates strong demand for it’s on-airport MRO services and TechOps services as well (as post-pandemic flight travel increases).

The company was founded in 2008 and is headquartered in Coral Gables, Florida. The current CEO is Nicolas Finazzo.

Be sure to add AerSale (ASLE stock) to your Watch List and if you haven’t done so already, check in on the performance of our Current Portfolio. Keep it simple and always do your due diligence.

This material is provided for informational purposes only and is not financial advice. The information contained herein should not solely be used for the formation of an investment decision, whether you are a long term or short term investor.