EMBJ

We rate EMBRAER S.A. (EMBJ) as a Buy with a composite score of 68.0/100 at a current price of $72.98. The stock scores above average across the majority of our six quantitative factors and ranks #154 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in stability (79th percentile) and quality (76th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (31th percentile) and momentum (72th percentile) tempers our overall conviction. We assign a Narrow Moat rating (54/100), Low uncertainty, and Standard capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

EMBRAER S.A. holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 68.0/100 places it at rank #154 in our full 7,333-stock universe. At $6.7B in market capitalization, EMBRAER S.A. is a mid-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

The near-term outlook is constructive, with revenue growing at 21% and momentum in the 72th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 31th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 18% (-24.5pp vs sector) narrow to operating margins of 9% (+7.9pp vs sector) and net margins of 4.3%, yielding a gross-to-net conversion rate of 24%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $72.98, EMBRAER S.A. appears undervalued relative to its fundamentals. Our value factor score of 73/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 151.0x (a 579% premium to the sector median of 22.3x), EV/EBITDA of 3.6x (discounted to peers), P/B of 10.6x, P/S of 0.5x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Low uncertainty rating to EMBRAER S.A.. The company exhibits strong financial stability with a beta of 0.74, conservative leverage (9% D/E), and a stability factor in the 79th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: elevated valuation multiple (P/E 151.0x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 79th percentile and quality factor at the 76th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (9% D/E) limits balance sheet risk; above-average stability (79th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate EMBRAER S.A.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 87.9%, and the balance sheet is managed within acceptable parameters (D/E: 9%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; EMBRAER S.A. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, EMBRAER S.A. receives a Buy rating with a composite score of 68.0/100 (rank #154 of 7,333). Our quantitative framework assigns a Narrow Moat (54/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 66/100.

Our analysis supports a constructive view on EMBRAER S.A.. The combination of identifiable competitive advantages, low uncertainty, and standard capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.