AerSale Corporation (NASDAQ:ASLE) Might Not Be As Mispriced As It Looks After Plunging 26%

Simply Wall St ·  Mar 12 06:19

To the annoyance of some shareholders, AerSale Corporation (NASDAQ:ASLE) shares are down a considerable 26% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 57% share price decline.

Since its price has dipped substantially, considering around half the companies operating in the United States' Aerospace & Defense industry have price-to-sales ratios (or "P/S") above 2.1x, you may consider AerSale as an solid investment opportunity with its 1.1x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

NasdaqCM:ASLE Price to Sales Ratio vs Industry March 12th 2024

How AerSale Has Been Performing

While the industry has experienced revenue growth lately, AerSale's revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on AerSale will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For AerSale?

AerSale's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 18%. Even so, admirably revenue has lifted 60% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next year should generate growth of 12% as estimated by the four analysts watching the company. With the industry only predicted to deliver 9.8%, the company is positioned for a stronger revenue result.

With this information, we find it odd that AerSale is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does AerSale's P/S Mean For Investors?

AerSale's recently weak share price has pulled its P/S back below other Aerospace & Defense companies. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

A look at AerSale's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for AerSale with six simple checks.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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