What is AER's Intrinsic value?

AerCap Holdings NV (AER) Intrinsic Value Analysis

Executive Summary

As of April 4, 2026, AerCap Holdings NV's estimated intrinsic value ranges from $119.05 to $273.97 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $273.97 +96.8%
Discounted Cash Flow (5Y) $237.34 +70.5%
Dividend Discount Model (Multi-Stage) $119.05 -14.5%
Dividend Discount Model (Stable) $178.82 +28.5%

Is AerCap Holdings NV (AER) undervalued or overvalued?

With the current market price at $139.18, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate AerCap Holdings NV's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1 2.37
Cost of equity 8.5% 18.1%
Cost of debt 4.0% 7.5%
Tax rate 13.9% 14.2%
Debt/Equity ratio 1.88 1.88
After-tax WACC 5.2% 10.5%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.8% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $7,697 (FY12-2025) to $10,361 (FY12-2035)
  • Net profit margin expansion from 46% to 46%
  • Capital expenditures maintained at approximately 70% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $237 $81,794M 69.3%
10-Year Growth $274 $87,906M 50.1%
5-Year EBITDA $341 $99,038M 74.7%
10-Year EBITDA $362 $102,604M 57.2%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 5.1%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 13.3%
  • Long-term growth rate: 0.5%
  • Fair value: $119.05 (-14.5% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 18.1% (Low) to 8.5% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $87 to $271
  • Selected fair value: $178.82 (28.5% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $23226M
Enterprise Value $65412M
Trailing P/E 6.19
Forward P/E 6.21
Trailing EV/EBITDA 8.50
Current Dividend Yield 82.85%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 1.88

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 33% $82.19
Discounted Cash Flow (5Y) 28% $59.34
Dividend Discount Model (Multi-Stage) 22% $23.81
Dividend Discount Model (Stable) 17% $26.82
Weighted Average 100% $213.51

Investment Conclusion

Based on our comprehensive valuation analysis, AerCap Holdings NV's intrinsic value is $213.51, which is approximately 53.4% above the current market price of $139.18.

Key investment considerations:

  • Strong projected earnings growth (46% to 46% margin)
  • Consistent cash flow generation

Given these factors, we believe AerCap Holdings NV is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.