Checking the Margins at AerCap Holdings

Margins matter. The more AerCap Holdings (NYSE: AER  ) keeps of each buck it earns in revenue, the more money it has to invest in growth, fund new strategic plans, or (gasp!) distribute to shareholders. That's why I check on my holdings' margins at least once a quarter. I'm looking for the absolute numbers, comparisons to sector peers and competitors, and any trend that may tell me how strong AerCap Holdings' competitive position could be.

Here's the current margin snapshot for AerCap Holdings and some of its sector and industry peers and direct competitors.

Company	TTM Gross Margin	TTM Operating Margin	TTM Net Margin
AerCap Holdings	62%	31.6%	14.6%
FLY Leasing (NYSE: FLY  )	98.8%	51.7%	26.1%
Aircastle (NYSE: AYR  )	97.4%	48.7%	16.4%
Atlas Air Worldwide Holdings (Nasdaq: AAWW  )	29.3%	17.3%	8.9%
Raytheon (NYSE: RTN  )	19.5%	10.5%	6.6%

Source: Capital IQ, a division of Standard & Poor's. TTM = trailing 12 months.

Unfortunately, that table doesn't tell us much about where AerCap Holdings has been, or where it's going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.

Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company's profitability. That's why I like to look at five fiscal years' worth of margins, along with the results for the trailing 12 months (TTM), the last fiscal year, and last fiscal quarter (LFQ). You can't always reach a hard conclusion about your company's health, but you can better understand what to expect, and what to watch.

Here's the margin picture for AerCap Holdings over the past few years.

(Because of seasonality in some businesses, the numbers for the last period on the right -- the TTM figures -- aren't always comparable to the FY results preceding them.)

Here's how the stats break down:

• Over the past five years, gross margin peaked at 85.7% and averaged 67.9%. Operating margin peaked at 52.3% and averaged 39.1%. Net margin peaked at 16.5% and averaged 14.4%.
• TTM gross margin is 62%, 590 basis points worse than the five-year average. TTM operating margin is 31.6%, 750 basis points worse than the five-year average. TTM net margin is 14.6%, 20 basis points better than the five-year average.

With recent TTM operating margins below historical averages, AerCap Holdings has some work to do.

If you take the time to read past the headlines and crack a filing now and then, you're probably ahead of 95% of the market's individual investors. To stay ahead, learn more about how I use analysis like this to help me uncover the home run stock you're too afraid to buy. Do-it-yourselfers can head over to our quotes page to review AerCap Holdings' latest filings directly.