HEI Stock Study (11-25-25)

Posted by Mark on May 2, 2025 at 07:18 | Last modified: November 25, 2025 09:47

I recently did a stock study on HEICO Corp. (HEI, $305.98). Previous studies are here, here, here, and here.

M* writes:

     > Heico is an aerospace and defense supplier that focuses on creating
     > replacement parts for commercial aircraft and components for defense
     > products. In commercial aerospace, Heico is the largest independent
     > producer of replacement aircraft parts, primarily for engines. In the
     > defense market, the company produces niche subcomponents used in
     > targeting technology as well as simulation equipment, among other
     > categories. It operates as two segments: the flight support group…
     > and the electronic technologies group… both of which supply the
     > aerospace and defense sectors to different degrees. The company is
     > persistently acquisitive, focusing on companies in similar or adjacent
     > markets that offer strong cash flow and profitable growth potential.

Over the past 10 years, this medium-size company has grown sales and EPS at annualized rates of 11.4% and 13.2%, respectively. Lines are mostly up, straight, and parallel with a slight dip in ’20 [and ’21 for EPS] due to COVID. Five-year EPS R^2 is 0.85 and Value Line (VL) gives an Earnings Predictability score of 85.

Over the past decade, PTPM leads industry and peer averages by ranging from 17.6% in ’24 to 22.2% in ’22 with a last-5-year mean of 19.9%. ROE leads peers and lags the industry while declining from 17.0% (’15) to 14.4% (’24) with a last-5-year mean of 14.4%. Debt-to-Capital is less than peer and industry averages while ranging from 10.0% in ’21 to 44.3% in ’23 with a last-5-year mean of 26.1%.

Quick Ratio is 1.4 and Interest Coverage is 7.3 per M* who assigns “Narrow” Economic Moat, gives “Standard” rating for Capital Allocation, and an A grade for Financial Health (per BI website). VL gives an A+ grade for Financial Strength.

With regard to sales growth:

• YF gives YOY ACE 15.1% and 9.9% for ’25 and ’26, respectively (based on 19 analysts).
• Zacks gives YOY ACE 14.8% and 10.2% for ’25 and ’26, respectively (6 analysts).
• VL projects 10.0% annualized growth from ’24-’29.
• CFRA projects 12.7% and 11.3% per year for ’24-’26 and ’24-’27, respectively.
• M* offers a 2-year ACE estimate of 13.3% per year and projects 10.8%/year x5 (per Equity Report).

My 9.0% forecast is below the range.

With regard to EPS growth:

• MarketWatch projects 15.6% and 13.3% per year for ’24-’26 and ’24-’27, respectively (based on 22 analysts).
• Nasdaq.com projects 12.0% YOY and 13.0% per year for ’26 and ’25-’27 (9, 9, and 3 analysts for ’25, ’26, and ’27).
• Seeking Alpha projects 4-year annualized growth of 15.7%.
• Finviz gives ACE 5-year annualized growth of 17.5% (10).
• LSEG estimates LTG at 19.7%.
• YF gives YOY ACE 30.1% and 12.1% for ’25 and ’26, respectively (17).
• Zacks gives YOY ACE 29.2% and 12.0% for ’25 and ’26 along with 5-year annualized growth of 18.9% (9).
• VL projects annualized growth of 14.1% from ’24-’29.
• CFRA projects 22.6% and 19.7% per year for ’24-’26 and ’24-’27, respectively, along with a 3-year CAGR of 20.0%.
• M* projects long-term annualized growth of 21.7%.

My 14.0% forecast is below the long-term-estimate range (mean of six: 17.9%). Initial value is ’24 EPS of $3.67/share rather than 2025 Q3 EPS of $4.57 (TTM).

My Forecast High P/E is 45.0. Over the past decade, high P/E increases from 32.3 (’15) to 73.4 (’24) with a last-5-year mean of 65.4 and last-5-year-mean average P/E of 54.2. I am above my comfort zone on this one.

My Forecast Low P/E is 29.0. Over the past decade, low P/E increases from 24.0 (’15) to 43.5 (’24) with a last-5-year mean of 43.0. My forecast is just below the 10-year median (29.8).

My Low Stock Price Forecast (LSPF) is $210.00. Default based on initial value given above seems unreasonably low at $106.40: 65.2% less than previous closing price and 50.9% less than the 52-week low. My [arbitrary] selection is 31.4% and 3.1% less, respectively.

Over the past decade, Payout Ratio (PR) ranges from 5.7% (’17 and ’24) to 7.7% (’21) with a last-5-year mean of 6.9%. I am forecasting below the range at 5.0%.

These inputs leave HEI in the SELL zone with a U/D ratio of 0.1. Total Annualized Return (TAR) is 0.9%.

PAR (using Forecast Average—not High—P/E) of -3.0% is unthinkable for an investment prospect. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR but even that is much less than the current risk-free rate (T-bills).

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 25 studies done in the past 90 days (my study and 10 other outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 11.5%, 15.0%, 58.3, 40.1, and 6.8%, respectively. I am lower across the board. VL projects a future average annual P/E of 45.0 that is less than MS (49.2) and greater than mine (37.0).

MS high / low EPS are $8.73 / $4.12 versus my $7.07 / $3.67 (per share). My high EPS is less due to growth rate and initial value. VL’s high EPS of $7.10 is about equal to mine.

MS LSPF of $191.40 implies a Forecast Low P/E of 46.5 versus the above-stated 40.1. MS LSPF is 15.9% greater than the default $4.12/share * 40.1 = $165.21, which results in more aggressive zoning. MS LSPF is 8.9% less than mine, however.

MOS is robust in the current study because my inputs are less than or near respective analyst/historical ranges and MS averages. Although my LSPF is higher, MS TAR is 8.7%/year greater than mine to further support the assessment.

With regard to valuation, PEG is 3.0, 5.1, and 4.2 per Zacks, M*, and my projected P/E, respectively: significantly overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is also expensive at 1.24.

I would not buy at current levels but existing shareholders may want to hold due to double-digit sales growth [projections]. This is one of the best growth stories around and except to say “nothing continues forever,” I see no signs of any slowdown.

Per U/D, HEI is a BUY under $237/share. BI TAR criterion is met [318 / ((14.77 / 100 ) +1 ) ^ 5] ~ $160 with a forecast high price ~$318.

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