Air Lease currently trades at $47 per share and has shown little upside over the past six months, posting a middling return of 3.9%. However, the stock is beating the S&P 500’s 1.4% decline during that period.

Is there a buying opportunity in Air Lease, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free .

Even with the strong relative performance, we're cautious about Air Lease. Here are three reasons why there are better opportunities than AL and a stock we'd rather own.

Why Is Air Lease Not Exciting?

Established by a founder of Century City in Los Angeles, Air Lease Corporation (NYSE:AL) provides aircraft leasing and financing solutions to airlines worldwide.

1. Long-Term Revenue Growth Disappoints

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Air Lease’s sales grew at a mediocre 6.3% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector.

2. Free Cash Flow Margin Dropping

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.

As you can see below, Air Lease’s margin dropped by 54.3 percentage points over the last five years. Almost any movement in the wrong direction is undesirable because it is already burning cash. If the trend continues, it could signal it’s becoming a more capital-intensive business. Air Lease’s free cash flow margin for the trailing 12 months was negative 89.2%.

3. Short Cash Runway Exposes Shareholders to Potential Dilution

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Air Lease burned through $2.44 billion of cash over the last year, and its $22.02 billion of debt exceeds the $472.6 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Air Lease’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Air Lease until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

Final Judgment

Air Lease’s business quality ultimately falls short of our standards. Following its recent outperformance in a weaker market environment, the stock trades at $47 per share (or 1.8× forward price-to-sales). The market typically values companies like Air Lease based on their anticipated profits for the next 12 months, but there aren’t enough published estimates to arrive at a reliable number. You should avoid this stock for now - better opportunities lie elsewhere. We’d recommend looking at one of our top software and edge computing picks .

Stocks We Like More Than Air Lease

The Trump trade may have passed, but rates are still dropping and inflation is still cooling. Opportunities are ripe for those ready to act - and we’re here to help you pick them.

Get started by checking out our Top 9 Market-Beating Stocks . This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free .