Air Lease Corporation (AL) is an aircraft leasing company. On November 7, 2013, the company reported fiscal third quarter earnings of $0.46 per share, which beat the consensus of analysts' estimates by a penny. In the past year the company's stock is up 36.72% excluding dividends (up 36.97% including dividends), and is beating the S&P 500 (SPY), which has gained 25.67% in the same time frame. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial, and technical basis to see if it's worth buying more shares of the company right now for the services sector of my growth portfolio.
The company currently trades at a trailing 12-month P/E ratio of 20.29, which is fairly priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 14 is currently inexpensively priced for the future in terms of the right here, right now. Next year's estimated earnings are $2.22 per share and I'd consider the stock inexpensive until about $33. The 1-year PEG ratio (0.7), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is inexpensively priced based on a 1-year EPS growth rate of 29.1%. The company has great near-term future earnings growth potential with a projected EPS growth rate of 29.1%. In addition, the company has great long-term future earnings growth potential with a projected EPS growth rate of 29.45%.
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 0.39% with a payout ratio of 8% of trailing 12-month earnings while sporting return on assets, equity and investment values of 2.1%, 6.8% and 2%, respectively, which are all respectable values. Because I believe the market may get a bit choppy here and would like a safety play, I don't believe the 0.39% yield of this company is good enough for me to take shelter in for the time being. The company started paying a dividend in early 2013.
Looking first at the relative strength index chart [RSI] at the top, I see the stock in middle ground territory with a value of 48.31 with downward trajectory, which is a bearish pattern. To confirm that, I will look at the moving average convergence-divergence [MACD] chart next and see that the black line is below the red line with the divergence bars flattening out in height, indicating the bearish momentum might be coming to an end. As for the stock price itself ($31.05), I'm looking at $33.70 to act as resistance and the 50-day simple moving average (currently at $30.40) to act as support for a risk/reward ratio, which plays out to be -2.09% to 8.53%.
- The company declared a 10.1 million share secondary offering on 21Nov13. This share offering dropped the stock 5.3% in the premarket session but I believe the stock will bounce back from that drop because the airline sector of the economy is on fire.
- On 07Nov13 the company reported fiscal third quarter earnings of $0.46 per share on revenue of $215.9 million versus expectations of $0.45 per share and $216.12 million.
Air Lease is inexpensively valued based on future earnings and on growth prospects. The technical situation of how the stock is currently trading is telling me we might be seeing some upward pressure for now but I would not be surprised to see it drop with the broader market. The stock recently issued a secondary offering, has a low dividend yield, and has no direction on a technical basis; it's for these reasons I'm not going to be buying right now. Right now I'm down on my position (-3.05%) and I will continue to hold onto the shares I have, reinvesting the dividends.
Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!