HEICO Corp. (HEI.US) is a U.S.-based company that manufactures, services, designs and distributes advanced components and services for the aerospace, defense, electronics, medical, automotive and telecommunications industries. HEICO's unique products have applications in niche segments of the economy. This year, the company has completed a series of acquisitions and beaten the S&P 500 index score:
- In July of this year, Heico began the acquisition of 3D Plus SA, a company with nearly 120 employees. The company manufactures 3D microeletronic products and memory used in satellites and medical equipment. Thanks to patented technologies, 3D Plus products save space and weight; the company's headquarters are located in France. HEICO is awaiting the government's decision on the acquisition, which should arrive 90 days after the deal, i.e. by October of this year. The amount of the acquisition was not disclosed;
- July also proved to be a record month in terms of the size of a single acquisition. HEICO has entered into an agreement to acquire Exxelia International for €453 million, in cash. The final deal is yet to be concluded, and the transaction will close by the end of Q1 2023. Exxelia employs nearly 2,100 Exxelia employees and is a global leader in the design, sale and manufacture of complex electronic components and rotary joint assemblies with applications in the aerospace, medical and energy industries. The Paris-based company also manufactures specialized resistors, capacitors, inductors and complex slip rings for nearly 3,000 customers worldwide;
- In early August, HEICO acquired Charter Engineering, a designer and manufacturer of RF and Microwave coaxial switches for the defense and aerospace industries. Charter is still the only manufacturer of low passive intermodulation, high-power switches. HEICO completed the acquisition of a niche segment of its dB Control subsidiary, with the giant acquiring another switch manufacturer, Paciwave, in 2021. In August, HEICO also acquired Sensor Systems, a manufacturer of aerial antennas used in military and commercial industrial applications, which employs 200 people;
- On September 1, news was received of the acquisition of a stake in Ironwood Electronics, a manufacturer of test sockets and adapters used in semiconductor manufacturing. The company's products are used in front of chip manufacturers for testing under critical operating conditions. Ironwood offers the industry's smallest area of so-called contact pins (up to 10,000 pins at 0.2 mm intervals);
- HEICO's main customers are space (including NASA) and military agencies from around the world, as well as most airlines and major repair facilities. Despite the slowdown in the global economy, the ROCE (return on invested capital) for HEICO's scaling operations looked decidedly better against competitors in the U.S. Aerospace&Defence industry, at 13% versus an industry average of 8.8% (data through July 2022). Capital invested in company's operations over the past five years has increased by 72%;
- The company's strategy appears to be to consolidate its influence in niche sectors that are key to strategic segments of the economy. For example, the production of some vehicles, machinery or components would not be possible without the individual advanced parts supplied by HEICO. For many years, the company has been one of the primary parts service providers for NASA and airlines like Lufthansa and American Airlines. For many years, Heico Sportiv has also been working with automaker Volvo, supplying mechanical and electronic parts for the Swedish premium cars producer.
Heico (HEI.US) shares, D1 interval. The company's shares have been in a strong uptrend since March 2020, having gained nearly 300% since then. The price has risen as sentiment around the aviation industry has begun to improve, bolstering demand for service and parts replacement. Since the beginning of 2022, Heico's shares have risen nearly 5%, beating by far the majority of companies in the S&P500 and NASDAQ indexes and giants like Apple and Microsoft, which have lost more than 10% of their stock market valuations since the beginning of the year. Importantly, the stock price performed well despite overheated fundamental valuation ratios. The price-to-earnings ratio (P/E Ratio) for Heico is now more than 60 points, the price-to-book-value ratio (P/B Ratio) is 8.3. By comparison, the index average P/E for the S&P500 is about 19.7 with a P/B of 3.9. The company maintains high ratios despite a relatively still small capitalization in the vicinity of $18 billion, indicating the high impact of the brand's quality, prestige and market relevance embodied in stock market valuations. The company has completed a series of dozens of strategic acquisitions consolidating manufacturers of niche technologies for the space, defense, automotive, aerospace and industrial sectors. Source: xStation5
