Willis Lease Finance (WLFC) is back in focus after second quarter results showed growth in its operating business but a drop of more than 50% in net income, alongside a 21% rise in assets under management.
Recent trading has been subdued, with the share price slipping about 13% over the past three months while still delivering a 26% year to date share price return and a 3-year total shareholder return above 300%. This signals strong longer term momentum despite near term cooling after the latest results and shifting views on risk and growth potential around Willis Lease Finance.
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So after a 3-year total return above 300% and a recent 13% pullback, is Willis Lease Finance still offering meaningful upside, or has most of the easy value already been taken and the valuation now doing the heavy lifting?
Price-to-Earnings of 13.8x: Is it justified?
On conventional metrics, Willis Lease Finance screens as inexpensive, with a P/E of 13.8x at a last close of $56.17 while peers and the wider US market trade on higher earnings multiples.
The P/E ratio compares what investors are paying for each dollar of earnings. This is particularly relevant for an asset heavy leasing and engine services business like Willis Lease Finance where profit generation and capital efficiency influence long term returns. A lower P/E can indicate that the market is cautious about the durability of those earnings or that it is not fully recognizing the company’s track record of becoming profitable over the past 5 years and its forecast 11.6% annual earnings growth.
Compared with the US Trade Distributors industry average P/E of 24.9x and a peer average of 61.1x, the current 13.8x multiple appears materially lower. The estimated fair P/E of 19.4x also sits above where the stock trades today, which suggests a level that market pricing could move toward if sentiment and earnings quality concerns ease.
Explore the SWS fair ratio for Willis Lease Finance.
Result: Price-to-Earnings of 13.8x (UNDERVALUED).
Still, the story around Willis Lease Finance can change quickly if asset values weaken or if leasing demand softens, which could pressure earnings visibility.
Find out about the key risks to this Willis Lease Finance narrative.
Another view using the SWS DCF model
The P/E work presents Willis Lease Finance as inexpensive, but the SWS DCF model points in a different direction. On this approach, an estimated future cash flow value of $9.96 per share versus the current $56.17 suggests the stock screens as expensive rather than cheap. Which signal do you rely on more: earnings today or long term cash assumptions?
