I. Executive Summary

This report provides a comprehensive investment analysis of HEICO Corporation (HEI-A), a technology-driven company specializing in the aerospace, defense, and electronics sectors. HEICO operates a highly successful and differentiated business model structured around two core segments: the Flight Support Group (FSG) and the Electronic Technologies Group (ETG). The FSG is the world’s largest independent provider of FAA-approved aftermarket aircraft parts, a business characterized by strong recurring revenues tied to the non-discretionary maintenance needs of the global airline fleet. The ETG focuses on designing and manufacturing high-reliability, mission-critical electronic components for a diversified set of niche markets, including defense, space, and medical technology.

The company’s long-term success is built upon several key pillars. First is a formidable competitive moat, particularly within the FSG, which is protected by the rigorous technical and regulatory barriers of the Federal Aviation Administration’s (FAA) Parts Manufacturer Approval (PMA) process. This moat allows HEICO to provide cost-effective solutions to airlines, securing a durable market position against Original Equipment Manufacturers (OEMs). Second is a disciplined and highly effective capital allocation strategy, centered on the serial acquisition of niche, high-margin businesses. This M&A engine, fueled by strong internal cash flow, has been the primary driver of the company’s exceptional long-term growth.

HEICO is led by the Mendelson family, who have been at the helm since 1990 and maintain a significant ownership stake, creating a strong alignment of interests with shareholders. This long-tenured, owner-operator management is widely credited with instilling a culture of long-term thinking, operational excellence, and disciplined growth, and is a key factor in the market’s perception of the company.

These strengths have translated into a remarkable financial track record of consistent growth in sales, profits, and cash flow, with superior operating margins and returns on capital. However, this high quality is reflected in the company’s valuation. HEICO’s shares consistently trade at a significant premium to both the broader market and its aerospace and defense peers. This valuation implies high expectations for continued flawless execution and leaves little room for error.

Key risks facing the company include the inherent cyclicality of the commercial aerospace industry, the perpetual competitive threat from OEMs seeking to reclaim profitable aftermarket share, potential changes to the favorable regulatory environment, and the execution risk associated with its acquisition-led growth strategy. This report will dissect each of these facets to provide a comprehensive view of the opportunities and risks inherent in HEICO Corporation.

II. Company Overview & Business Model

The HEICO Machine: A Dual-Segment Structure

HEICO Corporation’s business is organized into two distinct yet complementary operating segments: the Flight Support Group (FSG) and the Electronic Technologies Group (ETG).¹ This dual-engine structure allows the company to capitalize on different, yet often related, high-value industrial markets. In fiscal year 2023, the FSG was the larger segment, accounting for 60% of consolidated net sales, with the ETG contributing the remaining 40%.³ This represents a notable shift from fiscal 2021, when the revenue split was an even 50/50, underscoring the powerful tailwinds in the commercial aerospace market that have propelled the FSG’s recent growth.³

Flight Support Group (FSG) Deep Dive: The FSG is the cornerstone of HEICO’s commercial aerospace business and is positioned as the world’s largest manufacturer of FAA-approved jet engine and aircraft component replacement parts, other than the OEMs themselves.³ The segment’s operations are multifaceted:

• PMA Parts: At its core, the FSG designs, manufactures, and sells FAA-approved replacement parts. These parts are functional equivalents to those produced by OEMs but are offered at a significant cost savings to customers.³ The portfolio is extensive, covering parts categorized as rotable (which can be repaired and reused indefinitely), repairable (repaired a limited number of times), and expendable (single-use).³ The company’s product development engine is prolific, having developed a catalog of approximately 19,500 PMA parts and consistently adding between 350 and 550 new parts each year.³
• Repair & Overhaul: The FSG provides comprehensive repair and overhaul services for a wide array of aircraft components, including engine parts, avionics, instruments, and flight surfaces. A key offering is its proprietary Designated Engineering Representative (DER) repairs, which are FAA-approved alternative repair methods that can provide further cost savings and engineering flexibility to airlines.³
• Distribution & Specialty Products: The segment also acts as a distributor for various FAA-approved components and manufactures specialty products, such as thermal insulation blankets and advanced expanded foil mesh used for lightning strike protection on composite aircraft structures.³

Electronic Technologies Group (ETG) Deep Dive: The ETG is HEICO’s high-technology arm, focused on designing and manufacturing highly engineered, mission-critical electronic, data, microwave, and electro-optical products.³ These are not commodity items but rather specialized subcomponents designed for harsh environments and high-reliability applications. The ETG serves a diversified customer base across defense, space, medical, and telecommunications industries. In fiscal 2023, sales to military agencies and defense prime contractors constituted approximately 49% of the segment’s revenue.³ The product portfolio is vast and specialized, including items such as traveling wave tube amplifiers (TWTAs) for electronic warfare systems, high-voltage power supplies for medical and industrial imaging, radiation-hardened memory products for satellites, and underwater locator beacons for flight recorders.³

The Aftermarket Annuity and Recurring Revenue

A defining characteristic of HEICO’s business model, particularly within the FSG, is its significant exposure to recurring revenue streams. The demand for the majority of FSG’s products and services is not tied to the cyclical production of new aircraft but to the operational tempo of the existing global fleet. As long as aircraft are flying, they require scheduled maintenance, repairs, and the replacement of life-limited parts.¹ This creates a steady, annuity-like demand from airlines, cargo carriers, and military operators who have a non-discretionary need to maintain their assets for safety and operational readiness.¹ This model provides a high degree of revenue visibility and resilience, insulating the company from the volatility of new aircraft order cycles and providing a stable foundation for growth.

Niche Market Dominance

HEICO’s overarching corporate strategy is to achieve and maintain leadership positions within a multitude of well-defined, defensible niche markets.¹ Rather than competing head-to-head with industrial giants in large, commoditized markets, HEICO identifies and dominates smaller segments where it can build a durable competitive advantage through proprietary technology, engineering prowess, and high regulatory hurdles. Management has articulated this strategy by stating they manufacture over 50,000 different parts and do not want any single product to be so significant that its failure would be noticeable to the overall enterprise.⁵ This “federation of niches” approach allows HEICO to command strong pricing power and insulate itself from direct, price-based competition, fostering the high-margin profile that is a hallmark of the company.

The Dual-Class Share Structure

HEICO Corporation’s equity is structured with two classes of common stock: the HEI shares, which trade on the NYSE and carry one vote per share, and the HEI.A shares, which also trade on the NYSE but carry only one-tenth of a vote per share.⁶ As of December 18, 2023, there were approximately 54.7 million HEI shares and 83.5 million HEI.A shares outstanding.³

The primary implication of this structure is the consolidation of voting power. The Mendelson family and their related entities hold a controlling interest in the high-vote HEI shares, granting them effective control over the company’s strategic direction and corporate governance matters, such as the election of directors.⁷ While both share classes represent an economic interest in the company, the HEI.A shares offer limited influence. Consequently, the HEI.A shares are more liquid and have historically traded at a persistent discount to the HEI shares, a gap that reflects the market-ascribed value of voting control. The market’s willingness to award a premium valuation to a company with this governance structure is a powerful testament to the investment community’s confidence in the Mendelson family’s long-term stewardship and track record of value creation.

III. Industry Dynamics & Market Position

Commercial Aerospace Aftermarket (FSG’s Playground)

HEICO’s Flight Support Group operates within the large and growing commercial aerospace aftermarket. Industry forecasts project the global aircraft aftermarket parts market to expand from approximately $54.4 billion in 2025 to $93.5 billion by 2032, which represents a compound annual growth rate (CAGR) of 8.0%.⁸ This robust growth is underpinned by several powerful, interconnected trends.

First, global demand for air travel remains strong. Boeing projects that passenger traffic will more than double over the next 20 years, outpacing global economic growth.⁹ This fundamental demand fuels airline fleet growth and, critically for the aftermarket, increases flight hours, which directly correlates with maintenance needs.

Second, the major airframe OEMs, Airbus and Boeing, are facing significant production constraints and supply chain challenges.¹⁰ These issues, exemplified by the ongoing problems with the Boeing 737 MAX program, are delaying the delivery of new, more fuel-efficient aircraft. As a result, airlines are forced to extend the operational lives of their existing, often older, aircraft.¹⁰ Older aircraft require more frequent and intensive maintenance, creating a powerful tailwind for aftermarket service providers. This dynamic, where OEM production struggles translate directly into higher aftermarket demand, creates a uniquely favorable environment for HEICO.

Third, the industry is seeing an increasing emphasis on cost-effectiveness and sustainability. As airlines recover from the financial impact of the pandemic and face inflationary pressures, the need to manage maintenance costs is paramount. HEICO’s PMA parts, which offer OEM-equivalent quality at a lower price point, provide a compelling value proposition.³ Furthermore, the growing availability of Used Serviceable Materials (USM) from retired aircraft provides another avenue for cost-effective repairs and aligns with sustainability goals by promoting the reuse of components.⁸

Defense & Space Electronics (ETG’s Domain)

The Electronic Technologies Group is positioned in the resilient and technologically advancing defense and space electronics market. This market is also experiencing strong growth, with projections indicating an increase from roughly $232 billion in 2024 to $246 billion in 2025.¹² The primary drivers are rising global defense budgets in response to heightened geopolitical tensions, widespread military modernization programs, and the critical need to counter escalating cybersecurity threats.¹²

The nature of defense spending is shifting towards technology. Rather than focusing solely on large new platforms, militaries are prioritizing the upgrade of existing assets with advanced electronics. Key technology trends driving the market include the integration of artificial intelligence (AI), the proliferation of unmanned systems (drones), the development of cognitive electronic warfare capabilities, and a relentless push for miniaturization to optimize size, weight, and power (SWaP).¹² ETG’s portfolio of mission-critical subcomponents for C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance), electronic warfare, and space systems places it directly in the path of these growth trends.³ With North America remaining the largest market for defense electronics, ETG’s significant U.S. presence is a strategic advantage.¹²

The PMA Moat: A Regulatory Fortress

The cornerstone of HEICO’s competitive advantage in the FSG segment is the formidable barrier to entry created by the FAA’s Parts Manufacturer Approval (PMA) process. A PMA is a combined design and production approval that is legally required for a non-OEM to manufacture and sell replacement parts for installation on FAA-certified aircraft.¹⁵

Obtaining a PMA is a rigorous and technically demanding undertaking. A manufacturer must prove to the FAA that its part is as safe and reliable as the original OEM part. This can be achieved through several paths ¹⁵:

1. Identicality by Licensure: The manufacturer obtains a license from the OEM for the design data.
2. Identicality by Reverse Engineering: The manufacturer demonstrates that its part is identical in every respect (materials, dimensions, performance) to the OEM part.
3. Test and Computation: The manufacturer submits its own design data and substantiates its airworthiness through extensive structural and performance testing, similar to the process for certifying a new aircraft.

This regulatory framework creates a powerful moat. The technical expertise, engineering resources, and capital required to successfully navigate the PMA process are substantial. HEICO possesses decades of experience and a strong, established track record with the FAA, which allows it to process PMA applications more efficiently and predictably than potential new competitors.³ This regulatory fortress protects the FSG’s market position and pricing power.

Competitive Landscape

HEICO operates in highly competitive markets. In the Flight Support Group, the primary competitors are the powerful aircraft and engine OEMs, such as General Electric, RTX (Pratt & Whitney), and Rolls-Royce, who dominate the aftermarket for their own products.¹⁸ HEICO competes directly with their high-priced replacement parts and services. It also competes with other independent MRO providers and PMA parts manufacturers. HEICO’s competitive strategy is to leverage its PMA approvals to offer parts that are interchangeable with OEM products at a lower price, while providing high levels of service and availability.¹⁸

A key public competitor with a similar business model is TransDigm Group (TDG), which also focuses on acquiring proprietary, high-margin aerospace businesses with significant aftermarket exposure.¹⁸

In the Electronic Technologies Group, the company faces a fragmented landscape of both large and small competitors, domestic and foreign, some of which possess greater financial resources.¹⁸ Competition in these niche markets is based less on price and more on factors like unique design, advanced technology, product quality and reliability, and customer satisfaction.¹⁸ Other diversified aerospace and defense companies like Curtiss-Wright (CW) and Howmet Aerospace (HWM) are also considered peers.¹⁹

IV. Financial Performance & Analysis

An examination of HEICO’s financial history reveals a consistent and powerful pattern of profitable growth. The company has demonstrated a remarkable ability to expand revenues, maintain and improve industry-leading profit margins, and generate substantial cash flow through various economic and industry cycles. This performance is a direct result of its disciplined operational focus and successful strategic execution.

The following tables provide a summary of HEICO’s segment and consolidated financial performance over the past several fiscal years. Note: Data for fiscal years 2019-2022 are derived from figures presented in the 2023 10-K and other filings. Fiscal 2023 and 2024 data are from the 2024 Proxy Statement and press releases. Historical data prior to this period is referenced from older annual reports.

Table 1: Historical Segment Financial Performance (FY2019-FY2024)

(in millions USD)

Fiscal Year	FSG Net Sales	FSG Op. Income	FSG Op. Margin	ETG Net Sales	ETG Op. Income	ETG Op. Margin	Consolidated Net Sales	Consolidated Op. Income	Consolidated Op. Margin
2024	$2,314.8	$532.4	23.0%	$1,543.2	$292.1	18.9%	$3,858.0	$824.5	21.4%
2023	$1,780.8	$372.9	20.9%	$1,187.2	$252.4	21.3%	$2,968.0	$625.3	21.1%
2022	$1,257.7	$257.8	20.5%	$958.4	$249.2	26.0%	$2,216.1	$507.0	22.9%
2021	$979.8	$175.4	17.9%	$985.4	$264.1	26.8%	$1,965.2	$439.5	22.4%
2020	$1,003.5	$180.6	18.0%	$803.9	$215.4	26.8%	$1,807.4	$396.0	21.9%
2019	$1,217.4	$239.6	19.7%	$814.7	$220.2	27.0%	$2,032.1	$459.8	22.6%
Sources:.3 Note: Data compiled and calculated from multiple filings; margins are calculated as Operating Income / Net Sales.

Table 2: Consolidated Financial & Capital Metrics (FY2019-FY2024)

(in millions USD)

Fiscal Year	Cash Flow from Ops	Capital Expenditures	Free Cash Flow (Calc.)	Total Debt	Consolidated EBITDA	Net Debt / EBITDA
2024	$647.9	N/A	N/A	$2,252.8	$1,002.2	2.06x
2023	$560.4	$52.7	$507.7	$2,279.1	$775.4	N/A
2022	$452.8	$42.6	$410.2	$696.0	$620.1	N/A
2021	$471.9	$29.7	$442.2	$399.0	$537.1	N/A
2020	$478.4	$37.0	$441.4	$727.6	$489.1	N/A
2019	$385.9	$44.9	$341.0	$760.1	$552.1	N/A
Sources:.3 Note: FCF is calculated as CFO – CapEx. Net Debt/EBITDA is as reported by the company at fiscal year-end or quarter-end.

Analysis of Trends

Revenue Growth: HEICO’s growth has been both consistent and impressive. The company’s net sales have demonstrated a long-term compound annual growth rate of approximately 16% from fiscal 1990 to 2015.²⁵ This momentum has continued and accelerated in recent years. In fiscal 2024, consolidated net sales surged 30% to a record $3.86 billion.⁷ This growth is a balanced mix of strong organic performance and strategic acquisitions. For instance, in the second quarter of fiscal 2025, HEICO reported 15% year-over-year sales growth, which was composed of powerful 14% organic growth in the FSG segment and 4% organic growth in the ETG segment, augmented by the contribution from newly acquired businesses.²⁴ This demonstrates the company’s ability to grow both its existing businesses and successfully integrate new ones.

Profitability: A key story in HEICO’s financial performance is its superior and resilient profitability. Despite facing industry-wide headwinds from inflation and supply chain disruptions, the company has successfully expanded its margins.²⁸ The consolidated operating margin stood at a healthy 21.1% in fiscal 2023 and improved to 21.4% in fiscal 2024.⁷ This trend continued into fiscal 2025, with the margin reaching 22.6% in the second quarter.²⁴ This ability to protect and grow profitability in a challenging macroeconomic environment points to significant pricing power derived from its strong niche market positions and the mission-critical, non-discretionary nature of its products. The FSG’s operating margin has shown particular strength, improving to 24.1% in Q2 2025, reflecting the robust demand in the commercial aftermarket.²⁴

Cash Flow & Balance Sheet: HEICO is a prolific cash generator. Cash flow from operations consistently and significantly exceeds net income, a hallmark of a high-quality, capital-efficient business. In the second quarter of 2025, cash flow from operations surged 45% to $204.7 million, compared to net income of $156.8 million.²⁴ This powerful cash conversion is the lifeblood of the company’s growth strategy, providing the capital necessary to fund its steady stream of acquisitions without relying on excessive debt or dilutive equity financing. The company maintains a disciplined approach to its balance sheet. Even after the significant $2.05 billion acquisition of Wencor, management anticipated leverage would remain manageable. This proved correct, as the company’s net debt-to-EBITDA ratio, which was expected to be below 3.0x post-acquisition, had already fallen to a comfortable 1.86x by April 30, 2025.²⁴ This demonstrates a rapid de-leveraging capability that preserves financial flexibility for future M&A.

V. Capital Allocation Strategy

HEICO’s approach to capital allocation is disciplined, consistent, and central to its long-term value creation story. The strategy is overwhelmingly prioritized towards reinvesting capital back into the business, primarily through a programmatic and highly successful acquisition strategy.

The Acquisition Engine

Mergers and acquisitions are the primary engine of HEICO’s growth and the top priority for capital deployment. Since 1990, the company has completed approximately 98 acquisitions, building a track record of successfully identifying, acquiring, and integrating niche businesses.³ Another source notes over 100 acquisitions have been completed.⁵ Management maintains what it describes as a “highly active” pipeline of potential targets, constantly searching for opportunities that fit its strict criteria.³⁰

The company’s acquisition strategy is not about “empire building” but about strategic enhancement. HEICO targets businesses that broaden its product offerings, expand its technological capabilities, and provide access to new customers and markets.³ Key selection criteria include a strong potential for continued growth, robust cash flow generation, and availability at what management deems to be fair prices.³ A defining feature of HEICO’s approach is its “owning forever framework”; the company has sold only two businesses since its inception, reflecting a long-term owner’s mindset rather than a private equity-style “buy and flip” approach.⁵

Recent activity highlights this strategy in action. The acquisition of Wencor Group for an aggregate of $2.05 billion was a significant, scale-enhancing transaction for the FSG.²⁹ This was supplemented by a steady cadence of smaller, “bolt-on” deals that add specific capabilities, such as the acquisition of avionics manufacturer Gables Engineering and aircraft interior display company Rosen Aviation for the ETG, and avionics repair specialist Millennium International for the FSG.²⁶ This self-funding M&A model, where strong operating cash flow from the existing enterprise funds the purchase of the next, creates a virtuous cycle of growth.

Internal Investment (R&D)

While M&A is the primary growth driver, HEICO also invests in organic growth through research and development, which it considers integral to its success.³ In fiscal 2023, the company invested $95.8 million in R&D, with $26.4 million allocated to the FSG and a significantly larger $69.4 million to the ETG.³

This spending differential reflects the distinct nature of the two segments. The ETG’s higher R&D intensity is necessary to maintain its technological edge in cutting-edge defense, space, and medical electronics. In contrast, the FSG’s R&D is more applied, focused on the engineering work required to develop new PMA parts and alternative DER repairs.

Shareholder Returns

HEICO’s direct returns to shareholders in the form of dividends and buybacks are a secondary consideration in its capital allocation hierarchy.

• Dividends: The company has a long and consistent history of paying a semi-annual cash dividend.⁷ In June 2025, the Board of Directors announced a 9% increase in the dividend to $0.12 per share.²⁶ However, the dividend payout is intentionally kept low. The resulting dividend yield is nominal, consistently below 0.1%, with a payout ratio of only about 5%.¹⁹ This is a clear signal from management that they believe reinvesting earnings into the business via acquisitions will generate far superior long-term returns for shareholders than distributing that cash as income.
• Share Repurchases: The company has authorization for share repurchases and utilizes them opportunistically. However, they are not a primary or programmatic use of capital compared to the strategic imperative of M&A.

VI. Recent Developments, Growth Opportunities & Risk Factors

Recent Performance and Developments (2023-2025)

HEICO has demonstrated exceptional performance in the post-pandemic era, capitalizing on the robust recovery in commercial aviation and sustained demand in its defense and space end markets. The company has delivered a series of record-breaking quarters, consistently exceeding analyst expectations.³³

In the second quarter of fiscal 2025 (ending April 30, 2025), HEICO reported a 27% year-over-year increase in net income to $156.8 million and a 15% increase in net sales to a record $1.1 billion.²⁶ This strong top-line growth was driven by remarkable 14% organic growth in the Flight Support Group, supplemented by contributions from recent acquisitions.²⁴ This performance highlights the powerful demand for HEICO’s aftermarket parts and services as airlines increase flight activity.

The company has also been actively managing its portfolio and leadership structure. During this period, HEICO completed several strategic bolt-on acquisitions, including Gables Engineering, Rosen Aviation, and Millennium International, to bolster both its ETG and FSG segments.²⁶ In a key governance development, the company executed its long-term succession plan in May 2025, with Laurans A. Mendelson becoming Executive Chairman and his sons, Eric A. Mendelson and Victor H. Mendelson, ascending to the roles of Co-Chief Executive Officers.²⁶

Despite this success, the company is not without challenges. Management has consistently noted ongoing supply chain constraints as a headwind, stating it is an impediment to even faster growth.²⁸ Additionally, the ETG’s non-aerospace and defense businesses experienced a period of customer inventory destocking in fiscal 2024, which temporarily dampened growth in that segment, though management believes this process is now largely complete.⁷

Growth Opportunities & Strategic Initiatives

HEICO is well-positioned to capitalize on multiple vectors of future growth:

• Market Share Gains in Aftermarket: The company’s core strategy of continuously developing new PMA parts and DER repairs remains its largest opportunity. With thousands of parts still dominated by OEMs, HEICO has a long runway to expand its catalog and take further share in the growing global MRO market.
• International Expansion: While HEICO has a global footprint with subsidiaries in Europe and Asia ³⁴, there remains significant potential for deeper penetration into high-growth international markets. Long-term aviation forecasts from Boeing identify Eurasia, South Asia, and Southeast Asia as having the fastest-growing demand for commercial services, presenting a clear target for expansion.¹¹
• New Technology Adjacencies: The advanced technical capabilities within the ETG provide a platform for entry into emerging aerospace markets. These could include systems for advanced air mobility (AAM), the growing commercial space sector, and other high-tech industrial applications where high-reliability electronics are critical.³⁵
• Continued M&A: The company’s disciplined and successful acquisition strategy will remain a key growth driver. The fragmented nature of the aerospace and defense supply chain provides a continuous pipeline of potential niche, high-margin targets that can be accretive to HEICO’s portfolio.

Risk Factors & Potential Headwinds

Despite its strengths, HEICO faces several material risks that could impact its performance:

• Regulatory Risk: The entire business model of the Flight Support Group is predicated on the FAA’s PMA regulatory framework. Any significant change to this framework, such as making it more difficult to obtain approvals or more restrictive in scope, could fundamentally damage HEICO’s competitive advantage. Furthermore, a high-profile aviation incident linked to a PMA part, even if not HEICO’s, could lead to increased scrutiny and a flight-to-OEM safety preference among airlines.
• Competitive Threats: OEMs are the primary competitors and are not static. They could choose to compete more aggressively in the aftermarket by lowering their own part prices, offering more attractive long-term service agreements, or lobbying for regulatory changes that favor their products. Highly capable competitors like TransDigm also operate with a similar acquisitive model, potentially increasing competition for attractive M&A targets.¹⁸
• Aerospace Cyclicality: While the aftermarket is less volatile than OEM sales, it is not immune to the broader economic cycle. A severe global recession or another black-swan event (like the COVID-19 pandemic) that leads to a sharp and sustained decline in global flight hours would reduce MRO demand and negatively impact the FSG.
• M&A Execution Risk: The company’s heavy reliance on acquisitions for growth introduces significant execution risk. The challenge of finding suitable targets at reasonable valuations increases as the company grows larger. A misstep, such as overpaying for a large acquisition or failing to properly integrate a new business, could lead to value destruction.
• Customer Concentration: As is common in the industry, HEICO depends on a group of major airline and defense contractor customers. The loss of one or more of these key customers could have a material adverse effect on the business, a risk noted in its public filings.³

VII. Valuation Analysis

HEICO Corporation’s stock consistently trades at a premium valuation, reflecting the market’s high regard for its business quality, consistent growth, superior profitability, and strong management. An analysis of its valuation requires comparing its current multiples to its own historical ranges and to those of its closest peers.

Table 3: Valuation Multiples – Peer Comparison

(Data as of mid-2025, based on LTM figures. Multiples are approximate and vary across data providers)

Company	Market Cap (B)	EV/EBITDA	P/E (GAAP)	P/S	Net Margin (%)	ROE (%)
HEICO Corp. (HEI)	$43.5	~38.0x	~76.0x	~11.0x	~14.5%	~16.0%
TransDigm (TDG)	$90.2	~24.4x	~42.3x	~10.0x	~24.0%	N/A
Curtiss-Wright (CW)	$18.5	~27.6x	~41.0x	~5.9x	~13.4%	~18.0%
Howmet Aero. (HWM)	$73.1	~36.1x	~57.7x	~9.8x	~16.0%	N/A
A&D Industry Median	N/A	~13.6x	~24.7x	~2.1x	N/A	N/A
Sources:.19 Note: ROE and Net Margin data from.19 Multiples are synthesized from multiple sources for a representative comparison.

Historical Context

HEICO’s current valuation is elevated not only relative to its peers but also in comparison to its own historical levels. As of mid-2025, its trailing twelve-month (TTM) P/E ratio of approximately 75x stands significantly above its 10-year historical average of roughly 49x.³⁶ Similarly, its Price-to-Sales, Price-to-Cash-Flow, and Price-to-Book ratios are all trading at or near the high end of their respective 10-year ranges, indicating that market expectations are exceptionally high.³⁷ This suggests that the stock is priced for a continuation of its excellent performance, with little margin for error.

Peer Benchmarking

The peer comparison table starkly illustrates HEICO’s premium valuation. Its P/E and EV/EBITDA multiples are at the top of the peer group, which itself consists of high-quality, well-regarded companies.

The most direct and relevant benchmark is TransDigm Group (TDG), which shares a similar business model focused on acquiring proprietary, high-margin aerospace components with significant aftermarket exposure. While TransDigm also commands a premium valuation, HEICO’s P/E ratio is substantially richer. TransDigm operates with higher leverage and has historically used large, debt-funded special dividends as a primary means of shareholder return, whereas HEICO maintains a more conservative balance sheet and reinvests nearly all cash flow into a steady stream of bolt-on acquisitions. The valuation gap suggests the market may be placing a higher premium on HEICO’s lower-risk balance sheet and its consistent, programmatic M&A growth model.

Compared to more diversified peers like Curtiss-Wright (CW) and OEM-focused Howmet Aerospace (HWM), HEICO’s valuation premium is even more pronounced. This reflects HEICO’s higher exposure to the lucrative commercial aftermarket, its superior historical growth rates, and its consistently higher profit margins.

Justifying the Premium Valuation

The bull case for HEICO’s valuation rests on the argument that it is a superior business that merits a superior multiple. The premium is a payment for a unique combination of attributes:

• Consistency and Predictability: A long, uninterrupted track record of double-digit growth in sales and earnings.
• Defensible Moats: High regulatory and technical barriers to entry, especially in the PMA business.
• Superior Profitability: Consistently high and stable operating margins and returns on invested capital (ROIC).
• Aligned Management: A proven, long-tenured, family-led management team with significant personal capital invested in the business.
• Long Growth Runway: A clear and repeatable strategy for growth through acquisitions in a fragmented industry.

The market is effectively pricing HEICO not as a standard industrial company but as a high-quality “compounder,” a business capable of reinvesting its capital at high rates of return for a very long time.

Sum-of-the-Parts (SOTP) Framework

While a detailed SOTP valuation is beyond the scope of this report, the conceptual framework is useful. This approach would value the FSG and ETG segments separately by applying multiples from their respective pure-play peer groups. The FSG, with its aftermarket focus, would likely be benchmarked against TransDigm, warranting a high multiple. The ETG would be compared to a basket of high-end defense and industrial technology firms. A SOTP analysis would likely conclude that the market is assigning a premium valuation to both segments individually, reflecting the operational excellence and synergistic benefits (such as shared customer relationships and management discipline) of the consolidated HEICO enterprise.

VIII. Management & Corporate Governance

The Mendelson Legacy and Aligned Leadership

HEICO’s corporate culture and strategic direction have been shaped for over three decades by the Mendelson family, who assumed control in 1990.²⁵ The leadership is currently spearheaded by Laurans A. Mendelson, who recently transitioned from CEO to the role of Executive Chairman, and his sons, Eric A. Mendelson (Co-CEO and President of the Flight Support Group) and Victor H. Mendelson (Co-CEO and President of the Electronic Technologies Group).²⁶ This transition was presented as the culmination of a long-term, deliberate succession plan.

A critical element of HEICO’s governance profile is the significant equity stake held by the management team. The “Mendelson Reporting Group,” which includes the three key executives and their family entities, beneficially owned approximately 16.5% of the high-vote Common Stock as of January 2025.⁷ This substantial “skin in the game” creates a powerful alignment of interests between the controlling family and other shareholders. Management’s wealth is directly tied to the long-term performance of the company’s stock, fostering a focus on sustainable value creation over short-term metrics. This owner-operator model is a key qualitative factor that underpins investor confidence and helps justify the company’s premium valuation.

Executive Compensation

HEICO’s executive compensation philosophy is described as a “common sense” approach aimed at motivating executives to grow profits, cash flow, and market capitalization over the long term.⁷ The compensation structure consists of four main components: base salary, a performance-based annual cash bonus, stock options, and long-term/retirement plans.

Crucially, the incentive components are tied to key performance metrics. For fiscal 2024, the annual bonus for the lead executive officers was directly linked to achieving at least 10% year-over-year growth in three critical areas: Net Income attributable to HEICO, EBITDA, and Cash Flow from operating activities.⁷

In a positive governance development, the company has shown responsiveness to shareholder feedback. The 2024 proxy statement explicitly notes that, based on input from shareholders, the compensation committee did not issue any stock options to named executive officers in fiscal 2024. Furthermore, it stated its intention to shift future equity grants and contributions to the long-term compensation plan from being purely time-vesting to being performance-based.⁷ This move demonstrates that even with a controlling dual-class share structure, the board and management are attuned to shareholder perspectives on aligning pay with performance.

Transparency and Communication

HEICO adheres to standard corporate governance practices for a public company. It provides all required SEC filings (10-K, 10-Q, etc.), hosts regular quarterly earnings conference calls with analysts, and maintains a comprehensive investor relations website featuring financial reports, presentations, and corporate governance documents.³⁰ This provides investors with the necessary information to monitor the company’s performance and strategy.

IX. Conclusion: Synthesizing the Risk-Reward Profile

This analysis of HEICO Corporation reveals a uniquely positioned and exceptionally well-managed enterprise operating in attractive, high-barrier-to-entry markets. The following summary addresses the key questions central to an investment thesis.

1. How sustainable is HEICO’s competitive advantage in aerospace aftermarket parts?

HEICO’s competitive advantage in the FSG segment is highly sustainable. It is rooted in the formidable regulatory moat of the FAA’s PMA process, which requires significant technical expertise, capital, and time to overcome. This structural advantage is fortified by the company’s decades of experience, its strong reputation with customers and regulators, and its extensive catalog of over 19,500 approved parts. The current industry environment, characterized by OEM production delays that extend the lives of older aircraft, is actively strengthening this advantage in the medium term. The primary long-term threat remains a strategic and aggressive push by OEMs to reclaim aftermarket share through pricing, service contracts, or lobbying, but HEICO’s value proposition and entrenched position make this a difficult challenge for them to overcome.

2. What are the key drivers that could accelerate or decelerate growth over the next 3-5 years?

• Potential Accelerants: Growth could accelerate if (a) the strong recovery in global air travel continues to exceed expectations, driving higher flight hours; (b) OEM production and supply chain issues persist longer than anticipated, prolonging the favorable aftermarket conditions; and (c) HEICO successfully executes one or more large, accretive acquisitions, similar to the Wencor transaction.
• Potential Decelerants: Growth could decelerate if (a) a sharp global recession or geopolitical event significantly curtails air travel; (b) OEMs resolve their production issues, leading to a faster-than-expected fleet renewal cycle and increased competition in the aftermarket; or (c) a lack of attractive M&A targets at reasonable valuations slows the pace of the acquisition engine.

3. How effectively has management navigated recent industry challenges?

Management has navigated the recent challenges of supply chain disruption and inflation with exceptional effectiveness. This is most clearly evidenced by the company’s ability to not only protect but actively expand its operating margins during this period. This demonstrates significant pricing power and disciplined operational control. Their continued execution of the M&A strategy and prudent capital management have kept the balance sheet strong while simultaneously fueling record growth. The seamless leadership transition to the next generation of the Mendelson family further suggests a stable and well-managed organization.

4. What is the appropriate valuation framework given the company’s unique characteristics?

A standard valuation against the broad industrial sector is inadequate for HEICO. The most appropriate framework is a peer comparison analysis that heavily weights its valuation against its closest, high-quality competitor, TransDigm. This should be supplemented by a historical valuation analysis to provide context for its current premium relative to its own past performance. Given its superior and consistent growth, profitability, and ROIC, a significant premium multiple to the broader aerospace and defense peer group is warranted. However, the magnitude of that premium is the central debate. A sum-of-the-parts (SOTP) mental model is also useful for appreciating the distinct, high-quality nature of both the FSG and ETG segments.

5. How should investors think about the risk-reward profile at current valuation levels?

The risk-reward profile for HEICO at current levels is asymmetric and heavily influenced by its premium valuation.

• The Reward: The potential reward is ownership in a best-in-class industrial compounder with a proven formula for long-term value creation. The business possesses durable competitive advantages, operates in attractive markets with secular tailwinds, and is guided by a highly aligned and respected management team.
• The Risk: The primary risk is valuation. The current stock price appears to fully reflect the company’s operational excellence and has priced in a long runway of continued, near-flawless execution. There is little margin for safety. Any significant operational misstep, a problematic acquisition, a negative shift in the industry landscape, or simply a broader market de-rating of high-multiple growth stocks could lead to significant downside pressure on the share price. An investor at these levels is paying for perfection and is betting that the company can continue to meet or exceed the very high expectations set by the market.

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