FTAI Aviation (FTAI) has drawn fresh attention after launching FTAI Power, a business that converts retired CFM56 engines into gas turbines for AI data centers, along with better-than-expected Q4 results and a raised full-year earnings outlook.

Despite a 3.23% 1 day share price gain to US$235.54 following the FTAI Power launch and upbeat Q4 news, the 30 day share price return of 4.67% and 90 day share price return of 19.36% suggest some recent momentum cooling. This comes even as the 1 year total shareholder return of 134.35% and very large 3 and 5 year total shareholder returns point to a powerful longer term story.

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So with strong long term returns, double digit revenue and net income growth, and a share price that still sits at a reported 24% intrinsic discount, is there still an opportunity here for investors, or has the market already priced in future growth?

Most Popular Narrative: 30.5% Undervalued

With FTAI Aviation last closing at $235.54 against a narrative fair value of $338.90, the popular thesis frames current pricing as meaningfully below modeled potential, built on aggressive earnings and revenue assumptions that stretch several years out.

The successful scale-up of the Strategic Capital Initiative (SCI) partnership is accelerating FTAI's access to capital-light growth, recurring management fee income, and a broader customer base while freeing up excess capital for potential shareholder returns or debt reduction. This should support both higher free cash flow yields and enhanced returns on capital going forward.

Curious what kind of revenue expansion and margin uplift would need to play out to support that higher fair value, and how long the narrative assumes FTAI can sustain that pace without dilution or major balance sheet shifts? The full story lays out those numbers, the time frames behind them, and the valuation multiple this thesis thinks the market will accept.

Based on this widely followed narrative, the current share price sits below an earnings and cash flow path that leans on strong top line growth, rising profitability and a future earnings multiple below where the wider US Aerospace & Defense group sits today. The gap between last close and the narrative fair value rests on those projections holding together at the assumed discount rate of 7.72%, so readers may want to compare those expectations against their own view of the business and sector.

Result: Fair Value of $338.90 (UNDERVALUED)

However, the story can break if demand for legacy CFM56 and V2500 engines fades faster than expected, or if SCI partnerships and Chinese expansion fall short of assumptions.

Another View: Rich P/E Puts The Story To The Test

The narrative fair value of $338.90 suggests upside, but the current P/E of 50.6x is much higher than the US Aerospace & Defense average of 37.3x and the peer average of 21.6x, and even sits above the fair ratio of 54x. Is that premium a margin of safety or a margin for error?

Next Steps

With the mix of optimism and concern running through this story, it makes sense to check the numbers yourself and decide quickly where you stand, then weigh up the 4 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.