AIR Stock Risk & Deep Value Analysis
AAR Corp
DVR Score
out of 10
What You Need to Know About AIR Stock
We analyzed AAR Corp using our deep value framework. Sign in to see our full verdict and DVR Score.
We ran AIR through our deep value framework — analyzing financial health, distress signals, competitive moat, and risk factors. Our risk assessment: Moderate. Here's what we found.
AIR Risk Analysis & Red Flags
What Could Go Wrong
While AAR has strong operational momentum, its valuation (46.48x TTM P/E, 23.36x Forward P/E) is elevated for a mature aerospace services company. If growth decelerates, or new contracts fail to significantly boost margins, the stock could experience a significant de-rating, especially given ongoing insider selling.
Risk Matrix
Overall
Moderate
Financial
Low
Market
Medium
Competitive
Medium
Execution
Medium
Regulatory
Low
Red Flags
- ⚠
Significant insider selling (CFO and CEO sold ~107K shares worth ~$11.8M in recent quarters), which can signal lack of confidence.
- ⚠
High trailing P/E of 46.48, and forward P/E of 23.36, which is high for its industry without clear hyper-growth catalysts.
- ⚠
While improving, overall market share slightly declined in Q1 2026 (69.77% from 70.19%).
Upcoming Risk Events
- 📅
Potential slowdown in air cargo or passenger traffic
- 📅
Intensified competition leading to pricing pressures
- 📅
Unexpected downturn in defense spending or budget cuts
When to Reconsider
- 🚪
Exit if quarterly revenue growth falls below 10% YoY for two consecutive quarters, indicating a slowdown in execution or market demand.
- 🚪
Sell if adjusted operating margin consistently falls below 9%, suggesting competitive or cost pressures.
- 🚪
Exit if net leverage ratio increases significantly above 2.5x without a clear plan for deleveraging.
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Investment Thesis
AAR Corp is a well-positioned leader in the essential aerospace aftermarket, poised to benefit from robust defense spending and the ongoing recovery in commercial aviation. Strategic contract wins (Navy/Air Force) provide significant revenue visibility, while the introduction of the Airvoyant AI platform signals a commitment to operational efficiency and competitive differentiation. Despite being a mature industry, its strong execution, improving financials, and strategic pivot towards tech-enabled services make it an attractive investment for consistent growth, albeit with limited 10x potential.
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AIR Price Targets & Strategy
12-Month Target
$131.20
Bull Case
$150.00
Bear Case
$95.00
Valuation Basis
Based on 34.8x forward P/E applied to consensus FY2026 EPS of $3.77, aligning with analyst average price target.
Entry Strategy
Consider accumulation on dips to the $105-$110 range, as this area has shown prior support following recent strong contract announcements and could present a better risk-reward entry.
Exit Strategy
Take partial profits at $130-$135 (analyst average target zone) and set a stop-loss order if the stock breaks below $98, which would indicate a deterioration in sentiment or fundamentals.
Portfolio Allocation
3-5% for moderate risk tolerance, reflecting its established market position but limited 10x growth potential.
Price Targets & Strategy
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Is AIR Financially Healthy?
Valuation
P/E Ratio
25.67
Forward P/E
18.97
EV/EBITDA
15.23
PEG Ratio
1.42
Price/Book
3.12
Price/Sales
1.05
Profitability
Gross Margin
19.00%
Operating Margin
9.55%
Net Margin
5.46%
Return on Equity
12.07%
Revenue Growth
16.85%
EPS
$4.51
Balance Sheet
Current Ratio
2.72
Quick Ratio
1.26
Debt/Equity
0.80
Total Debt
$510.00M
Cash & Equivalents
$61.00M
Cash Flow
Operating Cash Flow
$192.00M
Free Cash Flow
$105.00M
EBITDA
$240.00M
Other
Beta (Volatility)
1.16
Dividend Yield
0.40%
Does AIR Have a Competitive Moat?
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Moat Trend
Stable to Expanding
Moat Sources
3 Identified
The moat is durable due to the high barriers to entry in aerospace MRO and supply chain, driven by stringent regulatory requirements, capital intensity, and the need for a vast, reliable global network. The Airvoyant platform further strengthens this by leveraging data and technology to enhance efficiency and customer stickiness.
Moat Erosion Risks
- •Emergence of low-cost competitors or disruptive digital platforms from new entrants.
- •Consolidation among customers (airlines) increasing their bargaining power.
- •Technological shifts (e.g., additive manufacturing) that could alter parts supply chain dynamics.
AIR Competitive Moat Analysis
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AIR Market Intelligence
Sentiment & Insider Activity
Social Sentiment
Neutral to slightly Bullish, driven by recent contract wins and AI platform launch, but not a widely discussed retail favorite.
Institutional Sentiment
Mixed but generally Positive, with a 'Moderate Buy' consensus and some recent price target upgrades (Truist Financial) and rating upgrades (Weiss Ratings), balanced by a downgrade to 'Hold' by Zacks.
Insider Activity (Form 4)
CFO Sarah Louise Flanagan sold 10,750 shares on February 4, 2026. An unspecified CEO sold 60,000 shares last quarter, contributing to total insider sales of 106,925 shares (~$11.8 million). No insider buys reported.
Options Flow
Normal options activity; no specific unusual put/call ratio or large block trades indicative of significant institutional positioning was reported in the provided research.
Earnings Intelligence
Next Earnings
Expected March 26, 2026 (Q4 Fiscal 2026)
Surprise Probability
Medium, given the recent trend of beating estimates for Q3 FY2026 (revenue by 4.7%, EPS by 3.3%), but analysts might adjust expectations upward.
Historical Earnings Pattern
Historically, AAR Corp tends to react positively to earnings beats, especially those accompanied by strong guidance or significant contract announcements, as evidenced by its recent stock performance after Q3 results.
Key Metrics to Watch
Competitive Position
Top Competitor
HEI (Heico Corp) or TDG (TransDigm Group) for aftermarket parts/components (not specified in research).
Market Share Trend
Slightly losing ground, with market share at 69.77% in Q1 2026, down from 70.19% in Q4 2025. However, recent contract wins could reverse this trend.
Valuation vs Peers
Trading at a premium on TTM P/E (46.48) and Forward P/E (23.36) compared to many mature industrial/aerospace peers, indicating higher growth expectations or market confidence.
Competitive Advantages
- •Extensive global supply chain network and logistics expertise
- •Long-standing relationships and contracts with government and commercial airlines
- •Proprietary technology integration with Airvoyant platform for efficiency and data insights
Market Intelligence
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What Could Drive AIR Stock Higher?
Near-Term (0-6 months)
- •Q4 FY2026 Earnings (Expected March 26, 2026)
- •Investor Day (May 12, 2026) - potential for new strategic initiatives/guidance
- •Continued integration and adoption of Airvoyant AI platform
Medium-Term (6-18 months)
- •Further contract wins leveraging recent successes with U.S. military
- •Expansion of MRO capabilities or new strategic partnerships
- •Market share gains from competitors in niche segments
Long-Term (18+ months)
- •Continued growth in global air travel driving demand for aftermarket services
- •Increased defense spending and military fleet modernization cycles
- •Data-driven competitive advantage through Airvoyant platform
Catalysts & Growth Drivers
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What's the Bull Case for AIR?
- ✓
Acceleration in market share gains, particularly in newly acquired contracts.
- ✓
Demonstrated ROI and customer adoption for the Airvoyant AI platform.
- ✓
Continued debt reduction and strong free cash flow generation.
Bull Case Analysis
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How AAR Corp Makes Money
AAR Corp generates revenue by providing essential aftermarket services and products to the global aerospace industry. This includes Maintenance, Repair, and Overhaul (MRO) services for aircraft, supply chain management, and the distribution of aircraft parts and components. They serve both commercial airlines and government/defense customers, ensuring aircraft remain operational and efficient. Their business model relies on long-term contracts, technical expertise, and a vast global network to deliver comprehensive support solutions, ranging from individual part sales to full-service logistical and technical support programs.
Read Full Business Model BreakdownFAQ
What is the DVR Score for AAR Corp (AIR)?
As of May 1, 2026, AAR Corp has a DVR Score of 5.5 out of 10, placing it in the "Proceed with Caution" category. This score is generated by our AI-powered deep value analysis framework that evaluates growth potential, financial health, competitive moat, and risk factors.
What is the market capitalization of AAR Corp?
AAR Corp's market capitalization is approximately $4.4B..
What is the risk level for AIR stock?
Our analysis rates AAR Corp's overall risk as Moderate. This assessment considers execution risk, market risk, financial risk, competitive risk, and regulatory risk. For a full breakdown, see the risk analysis section above.
What is the P/E ratio of AIR?
AAR Corp currently has a price-to-earnings (P/E) ratio of 25.7. This is in line with broader market averages.
Does AAR Corp pay a dividend?
Yes, AAR Corp pays a dividend with a current yield of approximately 0.40%.
Is AAR Corp's revenue growing?
AAR Corp has reported revenue growth of 16.9%. The company is showing strong top-line momentum.
Is AIR stock profitable?
AAR Corp has a profit margin of 5.5%. The company is profitable but margins are modest.
How often is the AIR DVR analysis updated?
Our AI-powered analysis of AAR Corp is refreshed regularly to incorporate the latest financial data, market conditions, and news. The most recent update was on May 1, 2026.
Important Disclaimer – Not Financial Advice
Deep Value Reports is an independent research platform for educational and informational purposes only. We are not financial advisors, investment advisors, or licensed professionals. The analysis, scores, and information provided on this page for AIR (AAR Corp) should not be construed as personalized investment advice, a recommendation to buy or sell any security, or an offer to provide investment advisory services.
All investments involve risk, including the potential loss of principal. Past performance does not guarantee future results. Always conduct your own research, consider your financial situation, and consult with a qualified financial advisor before making any investment decisions.