What is the market’s view of Air Transport Services Group’s future operating performance as reflected in the current price of $13? To achieve average annual stock market performance of 9.0% over the next 6 years, Air Transport Services Group shares will need to reach $22. Upper quartile performance will require a $26 Air Transport Services Group stock price by 2028.
Executive Summary
- Air Transport Services Group’s important characteristics: high expected growth, high financial strength, stability, and average profitability. A big positive influence on Air Transport Services Group’s valuation is its superior Growth.
- Very low valuation, lagging shareholder returns. Current valuation levels are very low relative to the Air Transport Services Group Peer Group. Recent market returns have substantially underperformed the Air Transport Services Group Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Air Transport Services Group shares should reach a level of $71 by 2028 — an 32.2% per year total shareholder return. A 2028 stock price of $22 would reflect median performance and a price of $26 would be required to reach upper quartile performance.
- Growth has been Air Transport Services Group’s biggest valuation strength. Historical growth has been very high relative to the Air Transport Services Group Peer Group and forecasted growth is relatively very high. Equity Growth has been superior. This factor has buoyed market perceptions of Air Transport Services Group. Air Transport Services Group’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity.
- Asset Turnover, and Pretax ROA are group lagging. These factors have negatively affected market perceptions of Air Transport Services Group. The company has normal cash needs.
- Air Transport Services Group’s risk profile is very favorable. Overall variability has been very low with very low revenue variability, only average E.P.S. variability, and very low stock price volatility. Financial Strength is relatively very high and earnings’ expectations are very low. The debt/capital ratio has declined very significantly.
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