Is StandardAero (SARO) A Bargain After Its Winnipeg Expansion?

StandardAero (SARO) just held a ribbon-cutting ceremony for a 70,000 sq. ft. expansion at its Winnipeg facility, adding capacity to service widely used GE CF34 and CFM56 engines for commercial and military fleets.

For investors, this Winnipeg expansion lands at a time when StandardAero’s share price has softened, with a 30-day share price return down 14.5% and year to date down 18.3%, while the 1-year total shareholder return is down a smaller 10.2%. This suggests recent weakness has outpaced the longer trend as the market reassesses risk and growth prospects.

Compare StandardAero’s recent pullback with other industrials by scanning our hand picked list of solid balance sheet and fundamentals (24 results).

StandardAero now trades well below both analyst targets and some intrinsic value estimates after that expansion driven selloff. Is the discount a margin of safety, or is the market correctly pricing in execution risk and cyclicality as you look at valuation next?

Price-to-Earnings of 24.3x: Is it justified?

StandardAero currently trades on a P/E of 24.3x, which screens as good value next to both peers and the broader US Aerospace & Defense industry based on Simply Wall St checks.

The P/E ratio compares what you pay for each dollar of current earnings, so it links the $24.22 share price directly to the profit the business generates today. For a repair and maintenance focused aerospace player with positive net income of $323.969m and forecast earnings growth, this kind of earnings based yardstick is a useful shorthand for how much optimism is already embedded in the stock.

On Simply Wall St’s numbers, SARO is viewed as trading at good value when stacked against similar companies on this same earnings multiple. The 24.3x P/E sits well below the peer average of 58x, and it also comes in under the estimated fair P/E of 26x that the SWS fair ratio model suggests the market could eventually gravitate toward if pricing fully reflected those inputs.

Against the broader US Aerospace & Defense group, the picture stays consistent. The sector average sits at 36.3x, so StandardAero’s 24.3x multiple is materially lower than both direct peers and the wider industry, which implies the share price is not paying up aggressively for the 17.31% forecast annual earnings growth that analysts see for the business.

Explore the SWS fair ratio for StandardAero.

Result: Price-to-Earnings of 24.3x (UNDERVALUED)

Still, StandardAero faces real pressure points, including potential execution missteps on new capacity and sensitivity to swings in commercial and defense maintenance budgets.

Find out about the key risks to this StandardAero narrative.

Another View on StandardAero’s Value

The SWS DCF model takes a different angle on StandardAero. It values the stock at $38.54 based on projected cash flows, which is higher than the current $24.22 price and flags the shares as undervalued. Is that a genuine opportunity, or just a sign that forecasts are too optimistic?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out StandardAero 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 49 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

Mixed signals around StandardAero’s value story can feel confusing. Move quickly, review the key figures yourself, then weigh the 5 key rewards and 2 important warning signs.

Looking for more investment ideas beyond StandardAero?

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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.

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