Willis Lease Finance (WLFC) has caught investor attention after announcing the acquisition of land for a new Willis Engine Repair Center in Johor, Malaysia, alongside a recent purchase of 12 aircraft and 13 engines.

These moves come after a choppy period for Willis Lease Finance’s stock, with the share price down 21.72% over the past 30 days and 6.60% over 90 days, yet still showing a 23.27% year to date share price return and a very large 3 year total shareholder return of 300.95%. This indicates that longer term momentum remains, despite recent volatility.

Scan 20 high quality undiscovered gems that, like Willis Lease Finance, are quietly building scale in capital intensive niches where fresh capacity and asset growth are starting to attract investor attention.

For Willis Lease Finance, that mix of recent share price pullback, a last close of US$55.11 and a price target of US$71 creates a wide valuation gap. How close is the current price to fair value now?

Price-to-Earnings of 13.5x: Is it justified?

On a simple P/E comparison, Willis Lease Finance trades at 13.5x earnings, which is lower than both the broader US market and its Trade Distributors peer group. That positions the current $55.11 share price below what many similar companies trade at for each dollar of earnings.

The P/E multiple shows how much investors are paying for each dollar of current earnings. For a capital intensive lessor and servicer of aircraft and engines, this is a straightforward way to compare Willis Lease Finance with other listed businesses that also convert large asset bases into profit.

Here, the 13.5x P/E sits below the US market at 19x, and well below the peer average of 61.7x. That gap indicates that the market is putting a lower price on Willis Lease Finance’s earnings stream than on many Trade Distributors, even though the company has been profitable over the past five years and has a long track record in its niche.

Against its own industry, the discount is particularly clear. Compared with the US Trade Distributors industry average P/E of 25.8x, Willis Lease Finance trades on a much lower multiple. This points to a meaningful divergence between what investors currently pay for its earnings versus typical peers.

Result: Price-to-Earnings of 13.5x (UNDERVALUED)

However, Willis Lease Finance still faces clear risks, including its capital intensive model and its reliance on aircraft and engine demand to support leasing and parts revenue.

Another view using the SWS DCF model

The SWS DCF model paints a very different picture for Willis Lease Finance. On this view, the estimated future cash flow value sits at $9.89 per share, well below the current $55.11 share price. That points to an overvalued result. Which lens do you trust more for your own assessment?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Willis Lease Finance 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 46 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

With both caution and optimism in the Willis Lease Finance story, now is a good time to review the full data and decide where you stand. To weigh those concerns against the potential upside, take a close look at the 1 key reward and 4 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.