AeroCentury Corp. (NYSEMKT:ACY) is involved in the defensive and cash generative business of aircraft leasing. Unfortunately, the company only leases to regional carries and its fleet is relatively underdeveloped compared to most of its peers. For example, the company owns 9 Bombardier Dash-8-300s, 7 Fokker 100s, 3 Bombardier Dash-8-Q400s, and 13 Fokker 50 aircraft. The 7 Fokker 100s are the only jet-powered aircraft in the fleet. Aero has a current market capitalization of $25.4 million and an average daily volume of 4,500 shares.

AeroCentury’s balance sheet

AeroCentury Corp. (NYSEMKT:ACY) does not have the best balance sheet in the world due to the high acquisition costs of aircraft. According to the company’s last reported fiscal quarter, Aero had a debt-to-equity ratio of 137% and a debt-to-asset ratio of 44%. Book value stood at approximately $33 per share, indicating that at current levels the company is trading at a price-to-book value of 0.5. Effectively this means that you can buy a fleet of aircraft for only fifty cents on the dollar; seems like a reasonable deal.

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Five year performance

AeroCentury Corp. (NYSEMKT:ACY) has had a profitable past few years. Actually, based on fiscal 2012 numbers, the company is trading at a historic P/E of only 4.9. On a trailing-twelve-month basis the company trades at a P/E of 3.2. So, not only is Aero cheap, but it remains profitable, unlike many other micro-caps currently trading below book.

On a cash flow basis the company is free cash flow positive and has been for the past few years.


Having said all of that, AeroCentury Corp. (NYSEMKT:ACY)’s outlook does not impress me and I feel that more of the same is to come. The company has been stuck in rut for the past, well, decade.

Based on the company’s numbers published for the last five years, it would seem that the company has consistently traded below book value. Actually, it would appear that a price-to-book value of 0.5 has been the average figure for the company during the past five years. The recent high of $20 per share has been close to the company’s 10-year high reached during 2011, just before the price collapsed back to a low of $6.20. Despite AeroCentury Corp. (NYSEMKT:ACY)’s book value hovering around $33 per share during the past five years, the highest price the company’s stock price has traded at it the $23.75. So, I would not place bets on the company trading at or near book value anytime soon.

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All in all, AeroCentury Corp. (NYSEMKT:ACY) looks to offer value but it could be a trap. The company is currently trading at a significant discount to book and is profitable. However, it has been in this position for a long time and there are no significant catalysts, that I can see, which will spur a re-rating of the company any time soon.