AerSale (ASLE)

Aerospace and defense company AerSale (NASDAQ:ASLE) fell short of the markets revenue expectations in Q3 CY2025, with sales falling 13.9% year on year to $71.19 million. Its non-GAAP profit of $0.04 per share was 77.1% below analysts’ consensus estimates.

Company Overview

Providing a one-stop shop that integrates multiple services and product offerings, AerSale (NASDAQ:ASLE) delivers full-service support to mid-life commercial aircraft.

Aerospace companies often possess technical expertise and have made significant capital investments to produce complex products. It is an industry where innovation is important, and lately, emissions and automation are in focus, so companies that boast advances in these areas can take market share. On the other hand, demand for aerospace products can ebb and flow with economic cycles and geopolitical tensions, which can be particularly painful for companies with high fixed costs.

AerSale’s competitors include Park Aerospace (NYSE:PKE), Ducommun (NYSE:DCO), and Astronics (NASDAQ:ATRO)

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, AerSale’s sales grew at a sluggish 3.9% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. AerSale’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Products and Services, which are 51.9% and 34.9% of revenue. Over the last two years, AerSale’s Products revenue was flat while its Services revenue averaged 10.9% year-on-year declines.

This quarter, AerSale missed Wall Street’s estimates and reported a rather uninspiring 13.9% year-on-year revenue decline, generating $71.19 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 28.9% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and suggests its newer products and services will catalyze better top-line performance.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

AerSale was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.9% was weak for an industrials business.

Analyzing the trend in its profitability, AerSale’s operating margin decreased by 9.5 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. AerSale’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, AerSale generated an operating margin profit margin of 4%, up 1.6 percentage points year on year. This increase was a welcome development, especially since its revenue fell, showing it was more efficient because it scaled down its expenses.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

AerSale’s full-year EPS dropped 146%, or 25.3% annually, over the last four years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, AerSale’s low margin of safety could leave its stock price susceptible to large downswings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Sadly for AerSale, its EPS declined by 7.9% annually over the last two years while its revenue was flat. This tells us the company struggled to adjust to choppy demand.

In Q3, AerSale reported adjusted EPS of $0.04, in line with the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects AerSale’s full-year EPS of $0.28 to grow 136%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

AerSale’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 11.1%, meaning it lit $11.09 of cash on fire for every $100 in revenue.

AerSale burned through $9.80 million of cash in Q3, equivalent to a negative 13.8% margin. The company’s cash flow turned negative after being positive in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

AerSale historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.1%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, AerSale’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

AerSale reported $5.27 million of cash and $160.8 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $43.92 million of EBITDA over the last 12 months, we view AerSale’s 3.5× net-debt-to-EBITDA ratio as safe. We also see its $7.47 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. Its revenue missed and its EBITDA fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $6.99 immediately after reporting.

Updated: December 4, 2025 at 10:26 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

AerSale doesn’t pass our quality test. First off, its revenue growth was uninspiring over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its declining EPS over the last four years makes it a less attractive asset to the public markets.

AerSale’s P/E ratio based on the next 12 months is 10.8x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $7 on the company (compared to the current share price of $6.71).