Time to Buy Embraer SA (ADR) (ERJ)?

As you can see, Boeing’s backlog is roughly equal to five times its annual revenue.* Accounting for the new SkyWest order (and assuming that the first 100 planes are fulfilled), Embraer’s backlog stands at 2.6 times annual revenue. Posting a metric that is more than 50% of Boeing’s in this category is no small feat. Maintaining this metric at the current level for the next several quarters will be a sign of sustained financial strength for Embraer.

A decent entry point
Despite Embraer’s poor first quarter of 2013, in which net income declined 70% from the prior year’s comparative quarter, the company now has some momentum behind it which should help it outperform. While its trailing-12-month P/E ratio seems high at 24.3, I believe this is largely a function of the stock price holding up even in the light of disappointing earnings. As Embraer’s earnings improve over the next year, this ratio will likely normalize, and it may even increase slightly. For those who were inclined to buy Embraer SA (ADR) (NYSE:ERJ) but were waiting for a rebound, this is not a bad time to start constructing a position.

The article Time to Buy Embraer? originally appeared on Fool.com and is written by Asit Sharma.

Fool contributor Asit Sharma has no position in any stocks mentioned. The Motley Fool recommends Embraer-Empresa Brasileira.

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