There have been numerous articles on AerCap (NYSE:AER) posted in the past few months touting the stock as a great long value idea. Despite that, the stock has dropped steadily from $50 last summer, to $28 today. From 8.5x earnings, the stock now trades at 4.5x 2016 earnings. While there have been plenty of articles explaining the solid nature of the industry (impressive ROEs through the cycle), in this piece I thought we would explore why the name has underperformed so dramatically, as well as examine a few downside scenarios.
I think the upside is easy to understand. Given historical earnings multiples in the 8-10x range and multiples of book value in the 0.90x-1.20x range, the target prices
|FREE||SA PRO MEMBERS|
|IDEA GENERATOR||X||Exclusive access to 10 PRO ideas every day|
|INVESTING IDEAS LIBRARY||X||Exclusive access to PRO library of more than 15,000 ideas|
|SECTOR EXPERT NETWORK||X||Exclusive access to all sector experts for direct consultation|
|PERFORMANCE TRACKING||X||Track performance of all PRO stock ideas|
|PROFESSIONAL TOOLS||X||Professional Idea Filters to zero-in based on industry, market cap and more|