Determining whether a company is one of the best stocks to buy now requires a detailed examination of that company. In this report, we do a detailed analysis of AAR Corporation.
AAR Corporation (AIR) is a diversified supplier of products and services to the worldwide aviation and defense markets. The company operates in four business segments: Aviation Supply Chain; Government and Defense Services; Maintenance, Repair and Overhaul (MRO); and Structures and Systems.
AIR is headquartered in Wood Dale, Illinois. But it serves customers in 110 countries from 60 locations around the world.
AAR Corporation (AIR) has turned in a middling performance over the previous business cycle (roughly seven to eight years). Its performance has not been bad, but it certainly has been the best. Its sales growth has been about average (around 4 percent). Its profits and cash flows have been lackluster, though not as weak as many other firms we cover.
One positive note, its free cash flow over the previous business cycle has been, on balance, positive. This is one good sign that the company is generating cash and not necessarily on the brink of bankruptcy.
It is not unusual for a rapidly growing firm to have negative free cash flows. In fact, this is about the only scenario we would tolerate a firm with negative free cash flows over an extended period. On the other, if a firm is not growing rapidly, it is a little worrisome if it isn’t generating positive free cash flows (at least over a period of 3 – 5 years). AIR at least seems to be generating positive free cash flows.
However, we feel AIR’s overall fundamentals are, at best, average. Its future growth prospects look subpar. Its balance sheet is not particularly strong and not characteristic of firm that is about to go on a buying spree. And its cash flows, most recently, have been negative. Overall, we rate its fundamentals as average, and we would not consider AIR one of the best stocks to buy now.
Stat Sheet – AAR Corporation 4/27/16
|Industry||Aerospace and Defense|
|Market Cap||$ 841|
|Growth Prospects||Below Average|
|Price Volatility||Above Average|
(Our assessment of this firm’s fundamentals will be in effect for the rest of calendar year 2016.)
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