Assessing HEICO (HEI) Valuation After Recent Share Price Cooling And Strong Long Term Returns
Why HEICO Stock Is Back on Investors’ Radar
HEICO (HEI) has caught investor attention again after recent share price moves, including a roughly 5% decline over the past week and a small gain over the past month.
See our latest analysis for HEICO.
While the 7 day share price return of 4.65% and a modest move over the past month suggest some cooling after a stronger 90 day gain of 7.55%, the 1 year total shareholder return of 42.89% and 5 year total shareholder return of 183.49% show that longer term investors have still seen much stronger results than recent trading alone might imply.
If HEICO has you looking at aerospace and defense suppliers more broadly, it could be a useful moment to scan through aerospace and defense stocks as a way to spot other ideas in the same space.
With HEICO trading at $336.15, management reporting revenue of about $4.49b and net income of roughly $690.39m, and some analysts setting a price target of around $373.56, the question is whether there is still an attractive entry point or if the market has already incorporated expectations for future growth.
Most Popular Narrative: 4.8% Undervalued
HEICO’s most followed narrative points to a fair value of $353, a touch above the recent $336.15 close, which puts the focus squarely on the company’s long term earnings potential.
The worldwide trend of aging commercial and military aircraft fleets, combined with increasing pressure for cost-effective maintenance solutions, strongly favors HEICO's business model, as airlines and governments seek alternatives to expensive OEM parts, HEICO's FAA-approved PMA parts and repairs continue to gain market share and drive margin expansion, as reflected in rising operating and EBITA margins.
Want to see what kind of revenue growth, margin profile, and future earnings multiple are baked into that fair value? The full narrative lays out the cash flow path and the expectations that sit behind that $353 figure.
Result: Fair Value of $353 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, the picture could change if OEMs tighten access to PMA parts, or if acquisition-led growth runs into integration issues or tougher regulatory review.
Find out about the key risks to this HEICO narrative.
Another Angle on HEICO’s Valuation
Our DCF model suggests HEICO’s shares at $336.15 sit about 7.1% below an estimated fair value of $362, which also points to undervaluation. With both the narrative fair value at $353 and the DCF outcome above today’s price, how comfortable are you with the assumptions behind each?
Look into how the SWS DCF model arrives at its fair value.
Build Your Own HEICO Narrative
If you see the numbers differently or prefer to test your own assumptions, you can build a custom HEICO view in minutes with Do it your way.
A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding HEICO.
Looking for more investment ideas?
If you stop at HEICO, you could miss other opportunities that fit your style, so keep building your watchlist while you already have the market in view.
- Spot potential value candidates early by scanning these 887 undervalued stocks based on cash flows that line up with strong cash flow expectations and sensible pricing.
- Capture growth themes in one place by checking out these 23 AI penny stocks that are tied to artificial intelligence trends across different sectors.
- Strengthen your income watchlist by reviewing these 13 dividend stocks with yields > 3% that currently offer yields above 3%.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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