Assessing Ducommun (DCO) Valuation After New $650 Million Credit Agreement with Bank of America

Ducommun (DCO) just finalized an amended credit agreement with Bank of America, putting a new $200 million term loan and a $450 million revolving credit facility in place. This move gives Ducommun more flexibility and updated access to capital for upcoming needs.

See our latest analysis for Ducommun.

After announcing its refreshed credit facilities, Ducommun’s share price has held steady near $89.59, with a robust year-to-date share price return of almost 41%. Momentum is clearly building, as total shareholder return is up 35% over the past year and has soared nearly 86% over three years. This suggests investors are increasingly upbeat about both its growth prospects and improved financing flexibility.

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With shares holding near recent highs and the company's strong run over the past few years, the real question is whether Ducommun’s current valuation leaves room for upside or if the market has already priced in its future growth.

Most Popular Narrative: 15.7% Undervalued

With Ducommun closing at $89.59 and the consensus narrative assigning a fair value of $106.25, expectations are running high that the stock has meaningful upside left. The narrative justifies this target with assumptions of margin gains, revenue growth, and operational improvements driving fundamentally higher earnings potential in the coming years.

Ongoing mix shift toward higher-margin engineered products and aftermarket (maintained at 23% of revenues, moving toward 25%+), together with value-driven pricing and restructuring actions, is increasing gross margins (recorded at 26.6% in Q2). This supports sustained improvements in net margins and earnings.

Read the complete narrative.

Want to know the math powering this premium target? The narrative banks on rising profitability, ambitious revenue expansion, and a future profit multiple that may surprise you. Which underlying assumptions could make or break this bullish outlook? Click through to see the full story and the bold numbers behind it.

Result: Fair Value of $106.25 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, execution missteps or unexpected defense spending cuts could quickly upend these optimistic projections and make the bullish outlook much shakier.

Find out about the key risks to this Ducommun narrative.

Build Your Own Ducommun Narrative

If you have a different take or want to dig into the details on your own, you can craft your own view in just a few minutes. Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Ducommun.

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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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