AerCap Holdings NV – Value Analysis (FRANKFURT:R1D) : December 29, 2017

Capitalcube gives AerCap Holdings NV a score of 34.

Our analysis is based on comparing AerCap Holdings NV with the following peers – AviaAM Leasing AB, Speedy Hire Plc, Cramo Oyj and Ramirent Oyj (AAL-PL, SDY-GB, CRA1V-FI and RMR1V-FI).

Investment Outlook

AerCap Holdings NV has a fundamental score of 34 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • It trades at a lower Price/Book multiple (1.14) than its peer median (1.62).
  • The market expects R1D-DE to grow more slowly than its peers and for its median ROE to decline.
  • R1D-DE‘s relatively high profit margins are burdened by relative asset inefficiency.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • R1D-DE‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • While R1D-DE‘s revenue growth in recent years has been above the peer median, the stock’s P/E ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company’s capital investment program and to-date returns suggest that the company is likely making big bets on the future.
  • R1D-DE seems too levered to raise additional debt.

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Leverage & Liquidity

R1D-DE would seem to have a hard time raising additional debt.

  • With debt at a relatively high 81.13% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 28.21%), and relatively tight interest coverage level of 1.96x, R1D-DE would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • All 4 peers for the company have an outstanding debt balance.

R1D-DE has maintained its Limited Flexibility profile from the recent year-end.

  • R1D-DE‘s interest coverage is downward trending and is now similar to its five-year average interest coverage of 2.07x.
  • Though its interest coverage has remained relatively stable at 1.96x compared to 2016, its peer median has increased to 6x from 4.75x during this period.
  • Interest coverage fell 1.25 points relative to peers. It is also below the 2.50x coverage benchmark unlike the peer median.
  • R1D-DE‘s debt-EV is greater than (but within one standard deviation of) its five-year average debt-EV of 80.40%.
  • The decrease in its debt-EV to 81.13% from 84.65% (in 2016) was also accompanied by a decrease in its peer median during this period to 28.21% from 30.42%.
  • Relative to peers, debt-EV fell 1.31 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
AviaAM Leasing AB 103.57 1.97 4.9 117.19
Speedy Hire Plc 22.21 1.26 6 82.87
Cramo Oyj 27.44 0.67 9.28 44.28
Ramirent Oyj 28.21 0.47 9.33 51.99
AerCap Holdings NV 81.13 0.56 1.96 12.13
Peer Median 28.21 0.67 6 51.99
Best In Class 22.21 1.97 9.33 117.19

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Company Profile

AerCap Holdings NV engages in aircraft leasing and aviation finance. It acquires new or used commercial aircrafts and lends them to its clients via operating leases. It also provides aircraft owners, financiers and investors with asset services to manage an aircraft portfolio. It operates through the Leasing, Financing, Sales, and Management of Commercial Aircraft and Engines segment. The company was founded in 1995 and is headquartered in Dublin, Ireland.


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