Critical Survey: Saab (OTCMKTS:SAABY) versus AAR (NYSE:AIR)

AAR (NYSE:AIR) and Saab (OTCMKTS:SAABY) are both aerospace companies, but which is the better investment? We will compare the two companies based on the strength of their valuation, institutional ownership, profitability, earnings, dividends, risk and analyst recommendations.

Volatility & Risk

AAR has a beta of 1.29, indicating that its share price is 29% more volatile than the S&P 500. Comparatively, Saab has a beta of -0.18, indicating that its share price is 118% less volatile than the S&P 500.

Institutional & Insider Ownership

90.7% of AAR shares are held by institutional investors. 3.6% of AAR shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares AAR and Saab’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
AAR	1.01%	12.29%	5.16%
Saab	7.17%	13.23%	4.94%

Earnings & Valuation

This table compares AAR and Saab”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AAR	$2.78 billion	1.15	$12.50 million	$0.78	104.66
Saab	$6.03 billion	4.61	$394.58 million	$0.62	41.89

Saab has higher revenue and earnings than AAR. Saab is trading at a lower price-to-earnings ratio than AAR, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for AAR and Saab, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AAR	0	2	3	0	2.60
Saab	2	1	0	1	2.00

AAR currently has a consensus target price of $91.00, indicating a potential upside of 11.48%. Given AAR’s stronger consensus rating and higher probable upside, analysts clearly believe AAR is more favorable than Saab.

Summary

AAR beats Saab on 9 of the 15 factors compared between the two stocks.

About AAR

AAR Corp. provides products and services to commercial aviation, government, and defense markets worldwide. The Parts Supply segment leases and sells aircraft components and replacement parts. The Repair & Engineering segment provides airframe maintenance services, such as airframe inspection, painting, line maintenance, airframe modification, structural repair, avionics service and installation, exterior and interior refurbishment, and engineering and support services; component repair services comprising maintenance, repair, and overhaul (MRO) services, engine and airframe accessories, and interior refurbishment; and landing gear overhaul services, including repair services on wheels and brakes. This segment also develops specific aircraft components and parts; and designs proprietary designated engineering representative repairs. The Integrated Solutions segment engages in the fleet management and operation of customer-owned aircraft; provision of supply chain logistics services, such as material planning, sourcing, logistics, information and program management, and parts and component repair and overhaul services; and flight hour component inventory and repair services. In addition, the segment provides integrated software solutions comprising Trax, a cloud-based electronic enterprise resource platform, as well as a suite of paperless mobility apps for automating MRO workflows. The Expeditionary Services segment designs, manufactures, and repairs transportation pallets; and containers and shelters for military and humanitarian tactical deployment activities, including armories, supply and parts storage, refrigeration systems, tactical operation centers, briefing rooms, laundry and kitchen facilities, water treatment, and sleeping quarters, as well as engages in provision of engineering, design, and system integration services for specialized command and control systems. AAR Corp. was founded in 1951 and is headquartered in Wood Dale, Illinois.

About Saab

Saab AB (publ) provides products, services, and solutions for military defense, aviation, and civil security markets worldwide. The company operates through Aeronautics, Dynamics, Surveillance, Kockums, and Combitech segments. The company develops military aviation technology, as well as conducts studies on manned and unmanned aircraft. It also provides ground combat weapons, missile systems, torpedoes, unmanned underwater vehicles, training and simulation systems, and signature management systems for armed forces; and niche products for the civil and defense market, such as underwater vehicles for the offshore industry. In addition, the company offers solutions for safety and security, surveillance and decision support, and threat detection, location, and protection, including airborne, ground-based and naval radar, electronic warfare, and combat systems, as well as C4I solutions. Additionally, it provides submarines with the Stirling system for air independent propulsion, surface combatants, mine hunting systems, and autonomous vessels; and systems development, systems integration, information security, systems security, communications, mechanics, and technical product information and logistics. Saab AB (publ) was incorporated in 1937 and is headquartered in Stockholm, Sweden.