Thursday, 14 January 2016

Analysis of AerCap

AerCap, a Dutch aircraft leasing company

Company: AerCap

ISIN NL0000687663 | WKN A0LFB3

Business: A Dutch aircraft leasing company that is listed on the New York stock exchange. They currently have over 1,300 owned and managed aircraft of which 458 are highly attractive, high-demand, fuel-efficient aircraft. AerCap serves over 200 customers today with their services: Leasing & Trading, Asset Management and AeroTurbine.

Active: In 90 countries world wide.

P/E: 9.8 (running year even lower)

This company was analysed due to a request via email. 

contrarian values of P/E, P/B, ROE as well as dividend for AerCap

The P/E for AerCap is excellent with 9.8 and the P/B is also great with 1.0 which then gives a very clear buy from Graham unless one considers that he was generally negative towards airplane industry and other heavy investment industries. The earnings so sales are also excellent with 22% but the ROE is only so, so with 10%. The book to debt ratio is scary but nothing out of the ordinary for the aircraft industry.
In the last five years they have had a spectacular yearly revenue growth rate of 30% which comes from them taking over an American competitor and it looks as if the merger with synergy effects have been successful. The motivated P/E ends up around 30 to 50 which means that AerCap is undervalued by the market today.
They pay no dividend which I do not like.

Conclusion: Graham, kind of says yes to this company and I am confused. The P/E, P/B are excellent and the ROE is so, so with the only big negative being that they do not pay a dividend. Since they made the "merger" they have completely exploded in terms of revenue and earnings which have increased even more than the merger would have suggested but also their debt have substantially increased. Now you can slap me on the fingers because I go macro... could it be that the decreased kerosene price are causing airline companies to open up more services which they themselves, at the moment, do not have the aircraft for and therefore the leasing business has increased substantially? I find it very difficult and I therefore decide not to invest in AerCap.

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