StandardAero, Inc. (SARO): A High-Conviction Buy in the Undervalued Aerospace MRO Sector with Margin Expansion and LEAP-Driven Growth

StandardAero, Inc. (SARO) has emerged as a standout performer in the aerospace maintenance, repair, and overhaul (MRO) sector, delivering robust revenue growth and margin expansion in Q3 2025 while positioning itself for long-term structural tailwinds. With a 20.4% year-over-year revenue increase to $1.5 billion and a raised full-year guidance range of $5.97 billion to $6.03 billion, the company is leveraging its diversified end-market exposure and strategic investments to capitalize on the post-pandemic aerospace recovery according to Q3 2025 results. Despite short-term free cash flow conversion challenges and a recent secondary share offering, StandardAero's long-term growth trajectory-anchored by the LEAP engine program-suggests the market may be underestimating its sustainable cash generation potential.

Robust Revenue Growth and Margin Expansion

StandardAero's Q3 2025 results underscore its ability to scale operations while improving profitability. Revenue surged to $1.498 billion, driven by double-digit growth in commercial aerospace, business aviation, and military/helicopter markets according to earnings data. Adjusted EBITDA rose 16.1% year-over-year to $195.6 million, with a margin of 13.1%-a testament to operational leverage despite supply chain constraints as reported in earnings call. The Component Repair Services segment, in particular, demonstrated resilience, with a 32.4% EBITDA increase and a margin expansion to 30.7% as detailed in earnings transcript.

However, the Engine Services segment faced headwinds from lower-margin work scopes and supply chain bottlenecks, which temporarily pressured margins as noted in earnings call. CEO Russell Ford emphasized that strategic investments in capacity expansion and key growth platforms are addressing these challenges, positioning the company for margin normalization over time according to press release.

LEAP Engine Program: A $1 Billion Annual Catalyst by 2030

StandardAero's long-term growth is anchored by its leadership in the LEAP engine program, a cornerstone of its commercial aerospace strategy. The program's revenue nearly doubled in Q3 2025 compared to the prior quarter, with new agreements signed to support its ramp-up as reported by financial sources. Management expects LEAP to generate $1 billion in annual revenue by late 2029/2030, driven by the program's 500+ engines in service and a 20-year service-life outlook according to Q3 2025 results. This visibility provides a durable growth tailwind, particularly as airlines prioritize cost-efficient maintenance for their LEAP fleets.

Addressing Short-Term Challenges

While StandardAero's fundamentals are strong, investors must consider near-term hurdles. A March 2025 secondary share offering-raising 30 million shares-created a temporary overhang as discussed in research analysis. Additionally, Q3 2025 saw free cash flow conversion challenges, with the company using $4 million in cash for the quarter due to supply chain delays for forgings and castings as reported by financial news. CFO Dan Satterfield noted, however, that visibility on constrained parts is improving, and the company expects to achieve 80–90% free cash flow conversion rates in the long term according to earnings call.

StandardAero has already raised its full-year 2025 free cash flow guidance to $170–$190 million, reflecting confidence in working capital efficiency and operational performance as reported in earnings call. These adjustments highlight the company's ability to navigate short-term volatility while maintaining a disciplined capital allocation framework.

Why the Market May Be Undervaluing SARO

StandardAero's valuation appears to discount its structural advantages in the aerospace MRO sector. The global MRO market is projected to grow at a 6–8% CAGR through 2030, driven by aging aircraft fleets and rising demand for engine and component services as stated in Q3 results. StandardAero's diversified end-market exposure-spanning commercial, business aviation, and defense-reduces cyclicality risk, while its LEAP program offers a high-margin, recurring revenue stream.

Moreover, the company's raised 2025 guidance and long-term margin expansion targets suggest underappreciated operational leverage. With a strong balance sheet and a focus on capacity expansion, StandardAero is well-positioned to convert its revenue growth into sustainable cash flow, even as it addresses near-term challenges.

Conclusion

StandardAero, Inc. (SARO) represents a compelling long-term investment in the undervalued aerospace MRO sector. Its robust revenue growth, margin expansion potential, and LEAP-driven visibility position it to outperform industry peers, while its disciplined capital allocation and strategic investments address short-term headwinds. For investors seeking exposure to the structural tailwinds of aerospace recovery, SARO offers an attractive risk-reward profile.