AAR Corp (AIR)
Profitability ratios
Return on sales
| May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | |
|---|---|---|---|---|---|
| Gross profit margin | 18.98% | 19.07% | 18.59% | 17.21% | 16.70% |
| Operating profit margin | 6.66% | 5.57% | 6.73% | 5.87% | 5.16% |
| Pretax margin | 1.40% | 2.51% | 6.09% | 5.77% | 3.90% |
| Net profit margin | 0.45% | 2.00% | 4.53% | 4.32% | 2.17% |
The analysis of AAR Corp's profitability ratios over the period from May 31, 2021, to May 31, 2025, indicates a general trend of improvement in gross profit margin and operating profit margin, whereas pretax margin and net profit margin exhibit notable fluctuations.
Gross Profit Margin: This ratio exhibits consistent growth over the analyzed period, increasing from 16.70% in May 2021 to 19.07% in May 2024 before slightly declining to 18.98% in May 2025. The upward trend suggests an enhancement in the company's ability to control the cost of goods sold relative to sales, thereby improving profitability at the gross level.
Operating Profit Margin: The operating margin demonstrates improvement from 5.16% in May 2021 to a peak of 6.73% in May 2023. Subsequently, it declines to 5.57% in May 2024 but rises again to 6.66% in May 2025. These fluctuations imply that the company has succeeded in increasing operational efficiency during the initial years, though it experienced some pressure in 2024 before demonstrating recovery.
Pre-Tax Margin: This margin trend is more volatile. It increased from 3.90% in May 2021 to a high of 6.09% in May 2023, indicating improved profitability before taxes. However, it sharply declines to 2.51% in May 2024 and further diminishes to 1.40% in May 2025, suggesting increased expenses or reduced pre-tax profitability during these periods.
Net Profit Margin: The net margin mirrors the pattern seen in the pretax margin, improving from 2.17% in May 2021 to 4.53% in May 2023, signaling a period of stronger bottom-line performance. Yet, subsequent declines to 2.00% in May 2024 and further down to 0.45% in May 2025 highlight declining net profitability, possibly due to increased tax liabilities, interest expenses, or other non-operating costs.
Overall, while the gross and operating profit margins denote some operational resilience and efficiency improvements, the significant decline in pretax and net profit margins towards May 2024 and May 2025 suggests pressure on the company's bottom-line profitability, which warrants further investigation into factors such as rising costs, operational challenges, or external economic conditions affecting profitability metrics.
Return on investment
| May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | 6.51% | 4.66% | 7.30% | 6.79% | 5.53% |
| Return on assets (ROA) | 0.44% | 1.67% | 4.92% | 5.00% | 2.33% |
| Return on total capital | 0.00% | 8.53% | 12.14% | 10.74% | 3.78% |
| Return on equity (ROE) | 1.03% | 3.89% | 8.21% | 7.61% | 3.67% |
The profitability ratios for AAR Corp over the defined fiscal periods reveal a fluctuating trend with notable variations across different metrics.
Beginning with the Operating Return on Assets (Operating ROA), the data indicates an upward trajectory from 5.53% as of May 31, 2021, to a peak of 7.30% on May 31, 2023. However, this positive trend diminishes considerably in the subsequent periods, declining to 4.66% in 2024 and further adjusting to 6.51% in 2025. These fluctuations suggest periods of improved operational efficiency followed by contractions, possibly influenced by operational challenges or shifts in revenue and expense performance.
The Return on Assets (ROA), which accounts for overall profitability relative to total assets, displays an initial increase from 2.33% in 2021 to 5.00% in 2022. Nevertheless, the ratio experiences a decline afterward, dropping sharply to 4.92% in 2023, and then decreasing below previous levels to 1.67% in 2024 and further to 0.44% in 2025. This downward movement indicates that the company's overall efficiency in generating profit from its assets has waned over time, particularly in the most recent fiscal years.
The Return on Total Capital demonstrates a significant rise from 3.78% in 2021 to 10.74% in 2022, followed by an increase to 12.14% in 2023. Subsequently, the ratio contracts to 8.53% in 2024 and reaches zero in 2025. The peak in 2023 reflects improved leverage or higher return margins on invested capital, but the downturn to zero suggests a potential erosion of profitability or a shift in capital structure that adversely impacts overall returns.
Return on Equity (ROE) shows a consistent increase from 3.67% in 2021 to 7.61% in 2022 and slightly higher to 8.21% in 2023, indicating effective value creation for shareholders during these periods. However, a decline is observed in subsequent years, with ROE falling to 3.89% in 2024 and further diminishing to 1.03% in 2025. This trend suggests a reduction in net profitability attributable to shareholder equity, possibly linked to declining net income, increased equity base, or other factors impacting residual earnings.
Overall, the analysis illustrates a period of growth and improved profitability for AAR Corp through 2023, followed by a notable decline in the subsequent fiscal years. The recent downturn in key profitability ratios signals potential challenges in operational efficiency, asset utilization, or profit generation that warrant further investigation into underlying factors affecting the company's financial health.