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Willis Lease Finance (WLFC) recently affirmed a quarterly dividend of $0.133 per share following its 3-for-1 stock split, along with a new five year engine storage agreement with Pratt & Whitney.
At a share price of $71.33, Willis Lease Finance has seen some short-term volatility, with the share price falling 5.74% over the past 30 days but rising 9.35% over 90 days. The 1 year total shareholder return of 59.86% and very large 5 year total shareholder return indicate strong longer term momentum.
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After a sharp run over the past year and a modest pullback in recent weeks, Willis Lease Finance now trades only slightly below analyst targets, while our model points to a premium. Is the market being too cautious or simply realistic about the risks?
Preferred P/E of 13x for Willis Lease Finance: Is it justified?
On a simple headline measure, Willis Lease Finance trades on a P/E of 13x, which screens as inexpensive compared to both the wider US market and its Trade Distributors peers.
The P/E ratio compares the current share price to earnings per share and gives a rough sense of how much investors are paying for each dollar of profit. For a leasing and parts business like Willis Lease Finance, which reports high quality earnings and 16.4% earnings growth over the past year, this metric can help you judge how that profit profile is being priced.
What stands out is that the company has outperformed both the US market and its industry over the past year, while also growing earnings faster than the sector benchmark, yet still trades at a P/E of 13x. Compared to the broader US market P/E of 19.3x, the market appears to be pricing Willis Lease Finance at a discount despite this recent earnings track record.
The gap is even clearer when stacked against peers. The US Trade Distributors industry trades on an average P/E of 25.2x, almost double Willis Lease Finance at 13x, even though the company has grown earnings faster than the industry and produced very strong multi year total returns.
Result: Preferred multiple of Price-to-Earnings of 13x (UNDERVALUED)
However, investors in Willis Lease Finance still need to weigh risks around future engine demand patterns and any shift in airline maintenance or leasing budgets that could limit potential growth.
Another View on Willis Lease Finance using the SWS DCF model
While the P/E of 13x paints Willis Lease Finance as inexpensive, the SWS DCF model points the other way. With the current share price at $71.33 and an estimated future cash flow value of $9.84, this approach frames the stock as materially overvalued based on those assumptions.
That kind of gap can make investors ask whether current earnings are flattered by conditions that may not persist or whether the DCF inputs are simply too conservative for a capital intensive leasing business. Which lens do you trust more when the signals disagree this much?
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Willis Lease Finance for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 55 high quality undervalued stocks. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.
Next Steps
With mixed signals across P/E and DCF for Willis Lease Finance, the next move is not obvious. Take a closer look at both the upside and the downside using the 2 key rewards and 1 important warning sign
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
