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Ducommun (DCO): Assessing Valuation After Earnings Beat Expectations and Year-on-Year Revenue Growth

Simply Wall St · 2d ago

Ducommun (DCO) just delivered a quarter that outpaced expectations, with revenue up year on year and adjusted operating income and EPS beating forecasts. The stock rose about 2% despite mixed aerospace sector results.

See our latest analysis for Ducommun.

That post earnings jump sits on top of a much bigger move, with a roughly 44% year to date share price return and a near 50% one year total shareholder return suggesting that momentum is still broadly intact despite recent volatility.

If Ducommun’s results have you rethinking aerospace exposure, this could be a good moment to scan other aerospace and defense stocks that might be riding similar demand trends.

But with Ducommun already up strongly and trading at a discount to analyst targets, yet still unprofitable on a net basis, is this a mispriced aerospace compounder, or are markets already baking in the next leg of growth?

Most Popular Narrative: 13.7% Undervalued

With Ducommun last closing at $91.70 against a narrative fair value of $106.25, the valuation framework leans optimistic but stays within sight of today’s price.

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), which supports sustained improvements in net margins and earnings.

Read the complete narrative.

Curious how a margin makeover, steady revenue expansion, and a future earnings multiple usually reserved for bigger names all tie together? The narrative’s math may surprise you.

Result: Fair Value of $106.25 (UNDERVALUED)

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

However, that upbeat trajectory could falter if commercial aerospace destocking lingers longer than expected or if defense budget priorities shift away from key missile and radar programs.

Find out about the key risks to this Ducommun narrative.

Build Your Own Ducommun Narrative

If you see the story differently or want to stress test the assumptions with your own inputs, you can build a fresh view in just a few minutes: Do it your way.

A great starting point for your Ducommun research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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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.