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A low price-to-earnings (P/E) ratio doesn’t always mean a stock’s cheap. But I think value investors should take a close look at Aercap Holdings (NYSE:AER) shares at a P/E multiple of 8.
The company makes money by buying and leasing aircraft. And it looks to me a potentially better pick than either of the FTSE 100 airlines.
Overview
With a few exceptions, airlines typically don’t like owning the aircraft they operate. And the reason’s straightforward – they’re expensive.
Buying and maintaining aircraft involves a lot of cash. By contrast, leasing involves a relatively small capital outlay early on and this gives airlines the possibility for rapid profits when demand’s strong.
The downside – and the reason I mostly don’t like airlines as investments – is that making ongoing lease payments requires constant cash generation. And in a cyclical industry,…
