Recent performance context for AerCap Holdings (AER)

AerCap Holdings (AER) has seen mixed share performance recently, with the stock roughly flat over the past month and down over the past 3 months, despite a positive total return over the past year and over multi year periods.

Despite some recent pressure, with the 3 month share price return down 7.8% and the year to date share price return down 3.5%, AerCap’s longer term picture looks stronger. The 1 year total shareholder return is 25.8%, and the 3 year total shareholder return is about 1.5x.

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So with AerCap posting a mixed recent share performance but solid multi year total returns, is a stock around $139 with analyst targets above $160 signaling undervaluation, or is the market already pricing in future growth?

Most Popular Narrative: 14.8% Undervalued

With AerCap closing at $139.57 versus a widely followed fair value narrative of about $163.78, the gap hinges on how investors view future earnings power, capital returns, and industry conditions.

Expansion of ancillary services, particularly AerCap's spare engine leasing and new engine/MRO partnerships such as the Air France-KLM JV, diversify revenue sources and add higher-margin income streams, positively impacting overall earnings growth.
Prudent capital allocation, supported by a strong balance sheet and ongoing deleveraging, positions AerCap to capture opportunities in sale-leasebacks and organic fleet growth as OEM deliveries ramp up, driving revenue and earnings upside while containing interest expense.

Want to see what is baked into that valuation gap? The narrative links AerCap's future earnings, margins, and multiple to a tight aircraft market and meaningful buybacks, with one central set of assumptions doing the heavy lifting.

Result: Fair Value of $163.78 (UNDERVALUED)

However, this hinges on tight aircraft supply and strong lease economics persisting, while risks around OEM delivery ramp ups and airline credit stress could quickly challenge that story.

Another View: Cash Flow Says Something Different

While the analyst fair value narrative suggests AerCap is about 14.8% undervalued around $139, the Simply Wall St DCF model points the other way, with an estimate of $92.53 that implies the stock is trading well above its modeled future cash flows. Which story do you think fits your expectations better?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out AerCap Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 53 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Does this mix of risks and rewards leave you on the fence? Act while the information is fresh and weigh both sides by reviewing the 3 key rewards and 3 important warning signs.

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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.