Summary
- Q3 (ending July 31) financial results showed continual growth.
- Niche acquisitions continue.
- Aviation, defense, and aerospace markets are robust.
- The high P/E commands high growth.
Investment Thesis
HEICO (NYSE:HEI) is a growing industrial company doing business in the aerospace, electronics, space and defense markets. HEI operates through two divisions - the Flight Support Group and the Electronic Technology Group. HEI focuses on niche markets; aftermarket parts and service; and highly engineered and technical products with high barriers to entry and strong cash flow.
The Q3, ending July 31, financial results were released after the market on August 27. The HEI conference call was conducted the morning of August 28. While the financial results were excellent, setting records in most attributes, the stock sold off 7% at the opening. Apparently, the market felt that the solid performance didn't justify the high multiple forward P/E of 61. Investors moved in and bought the dip and the stock closed at - .92%. On the following day, August 29, the stock opened up 1.5%. Here's the five-day chart:
Source: Seeking Alpha
The stock has advanced nearly 60% in one year.
I'm sticking with them based upon the continuing revenue and income increases, participation in solid, robust markets, continuing niche acquisitions at fair and reasonable prices, and low debt ratios and excellent cash flow. It is a mid-sized company with annual revenue approaching $2 billion.
