Stock market crashes are an opportune time to buy. High quality companies, such as HEICO Corporation, are impacted by general market panic and sell-off, but the fundamentals of these companies stay the same. In other words, now is the time to buy strong, well-proven stocks at an attractive discount.
HEICO Corporation, through its subsidiaries, designs, manufactures, and sells aerospace, defense, and electronic related products and services in the United States and internationally. Established in 1949, and headed by CEO Laurans Mendelson, the company provides employment to 5.40k people and with the company’s market cap sitting at US$12b, it falls under the large-cap category. Typically, large companies are well-established and highly resourced, meaning that stock market volatility may impact some short-term strategic decisions but unlikely to matter in the long run. Therefore, large-cap stocks are a safe bet to buy more of when the general market is selling off.
HEICO currently has US$609m debt on its books which requires regular servicing. This means it needs to have sufficient cash-on-hand to meet upcoming interest expenses. HEICO generates enough earnings to cover its interest payments, more specifically, its interest coverage ratio (EBIT/interest) is 19.28x, which is well-above the minimum requirement of 3x. Furthermore, its operating cash flows amply covers its total debt by 54%, which is higher than the bare minimum requirement of 20%. And, a given, its liquidity ratio holds up well with cash and other liquid assets exceeding upcoming liabilities, meaning HEI’s financial strength will continue to let it thrive in a fickle market.
HEI’s profit growth over the previous five years has been positive, with an average annual rate of 18%, outperfoming the industry growth rate of 8.3%. It has also returned an ROE of 17% recently, above the industry return of 14%. This consistent market outperformance illustrates a robust track record of delivering strong returns over a number of years, increasing my conviction in HEICO as an investment over the long run.
Next Steps:Based on these three factors, HEI makes for a strong long-term investment in the face of a fickle stock market. If you’re a risk averse investor, lining your portfolio with proven companies you’re willing to buy more and more of as the price falls, is a good strategy to build your wealth over the long run. This is the beginning of your research, but before you decide to buy HEI, I highly urge you to understand more about the company, in particular, in these following areas:
- Future Outlook: What are well-informed industry analysts predicting for HEI’s future growth? Take a look at our free research report of analyst consensus for HEI’s outlook.
- Valuation: What is HEI worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether HEI is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.