In Focus – AIR

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.

Background

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.

Stock Fundamentals

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

Ticker AIR
Industry Aerospace and Defense
Price $ 24.44
Market Cap  $ 841
Dividend Yield 1.23
Dividend/CFOp NM
Equity/Assets 0.562
Average Equity/Assets 0.484
Financial Strength Average
Growth Prospects Below Average
Beta 1.70
Price Volatility Above Average
Stock Fundamentals C

(Our assessment of this firm’s fundamentals will be in effect for the rest of calendar year 2016.)

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Disclaimer – Information contained herein has been obtained from sources believed to be reliable. Neither the author nor the publisher guarantees the accuracy or completeness of the information and methods described. This information is offered as general commentary only. It is not intended as investment advice. Investment and trading of securities involves risk, including of loss of capital. Market conditions change over time, and no assurance can be given that a reader may apply the principles described to make a profit. The author and publisher expressly disclaim all and any liability to any person for any investment or trading decisions that the reader may make in reliance on this information.

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In Focus – AIR

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