At today's price, AAR's stock is pricing in roughly 42% annual free-cash-flow growth for the next ten years, at a 10% discount rate. Over the past five years, the company's actual revenue growth averaged 14.9% a year, and operating income grew 27.0% a year.
At its current price, AIR implies ~42% annual free-cash-flow growth for the next 10 years, discounted at 10%.
AAR's actual 5-year revenue growth has averaged 14.9% a year; operating income grew 27.0% a year over the past four years.
Why 42% comes out so high
AAR's revenue and operating income have grown steadily, but its free cash flow has been small and erratic — a three-year (FY2024–2026) average of just $25.8M against an enterprise value (market cap plus net debt) north of $5.7B. When the denominator (FCF) is this small relative to enterprise value, the growth rate needed to justify the price mechanically comes out large. That's a real limitation of reverse-DCF math on a business like this one, not necessarily a sign the company is overvalued.
| FY2022 | FY2023 | FY2024 | FY2025 | FY2026 | |
|---|---|---|---|---|---|
| Free cash flow | 57.9 | -6.2 | 13.9 | 1.4 | 62.1 |
Even comparing against the fastest-growing line item available (operating income), the market's ask still isn't met by AAR's historical growth.
Sensitivity: what if the discount rate moves?
| WACC | Required annual growth |
|---|---|
| 8% | 35.5% |
| 10% (base case) | 41.6% |
| 12% | 46.9% |
Across the plausible 8–12% discount-rate range, the required growth rate stays between 35% and 47% — well above the historical range of 15–27%.
What would move this number
- Using the unadjusted FY2026 FCF figure ($62.1M) instead of the 3-year average lowers the required growth rate at a 10% discount rate from 41.6% to 28.8% — still above the 14.9% historical revenue growth rate, but a much smaller gap.
- Assuming a more conservative 12% discount rate raises the required rate to 46.9%.
- Changing the terminal growth rate (2.5%) or the projection window (10 years) shifts the result but doesn't overturn the core finding: the market is pricing in more growth than AAR's historical record on any of these measures.
Show your work
Five inputs, sources, model assumptions, and the calculation
- Share price$124.94 — stockanalysis.com, Sept. 11, 2026 close
- Shares outstanding (diluted approx.)39.39M — stockanalysis.com, Sept. 11, 2026; DEF 14A reports 40,258,840 basic shares as of July 28, 2026
- Market cap$4,920M — price × shares (calculated)
- Total debt$900.0M — 10-K FY2026, p.22
- Cash & equivalents$84.0M — 10-K FY2026, p.47
- Net debt$816.0M — total debt − cash (calculated)
- Enterprise value$5,736M — market cap + net debt (calculated)
- Base FCF (normalized)$25.8M — FY2024–2026 average, 10-K FY2026 p.50 / FY2023 p.42
Model: free cash flow is assumed to grow at a constant annual rate g for 10 years, then at a 2.5% terminal rate thereafter. We solve by bisection for the value of g that makes the present value of those cash flows equal today's enterprise value. All calculations were run in Python.
EV = Σ(t=1..10) FCF₀×(1+g)ᵗ/(1+WACC)ᵗ + [FCF₀×(1+g)¹⁰×1.025/(WACC−0.025)]/(1+WACC)¹⁰, solved for g by bisection.
The fine print
- Change the discount rate, the projection window, the terminal growth rate, or how FCF is normalized, and the answer moves substantially — this is a company where that sensitivity is unusually large.
- A reverse DCF shows what the market currently expects — it does not say what the stock is "worth."
- Whether AAR can sustain 40%+ FCF growth depends on whether FY2026's four acquisitions and the Legacy Commercial Programs wind-down actually deliver the margin expansion the market appears to be pricing in — that's a business question, not a math one.
- Any investment decision, and its outcome, is your own responsibility.
How this number is built, and how banks, REITs, and negative cash flow are handled: see our methodology.
Frequently asked questions
What growth rate does AIR's stock price assume?
At its current price, AAR is pricing in roughly 42% annual free-cash-flow growth for the next ten years, discounted at a 10% rate.
How does that compare to AAR's actual growth?
AAR's revenue grew 14.9% a year on average over the past five years, and operating income grew 27.0% a year over the past four — both well below the roughly 42% annual free-cash-flow growth the current price implies, partly because AAR's free cash flow is small and volatile relative to its enterprise value.
What share price was used for this analysis?
This analysis used $124.94, AAR's closing price on Sept. 11, 2026.