HEICO

Phase A — Understand the business

Lens 1 · Company Overview

HEICO is a Hollywood, Florida-based ($.01-par dual-class) aerospace and defense manufacturer that makes money two ways, in two segments:

• Flight Support Group (FSG) — 70% of FY2025 sales. The crown jewel. HEICO "believes it is the world's largest manufacturer of FAA-approved jet engine and aircraft component replacement parts, other than the OEMs and their subcontractors". This is the PMA (Parts Manufacturer Approval) business: HEICO reverse-engineers and FAA-certifies replacement parts that are interchangeable with OEM parts (GE/CFM, Pratt & Whitney, Rolls-Royce on engines) and sells them ~30-50% cheaper to airlines and MRO shops. Plus repair-and-overhaul (R&O) services and specialty products (missile hardware, thermal blankets, composites, parachutes). FY2025 FSG product-line mix (H1 FY2026): aftermarket replacement parts 62%, repair/overhaul 24%, specialty 14%.
• Electronic Technologies Group (ETG) — 30% of FY2025 sales. Higher-margin niche electronics for defense, space, aerospace, medical, telecom: electro-optical/infrared test equipment, microwave power modules, traveling-wave-tube amplifiers, memory products, underwater locator beacons, RF/microwave, crashworthy fuel bladders, antennas, TSCM (surveillance countermeasures), high-reliability passive components.

Customers: commercial airlines, air-cargo carriers, MRO facilities, OEMs, and U.S./foreign governments. Customer concentration is low and a genuine strength — "No one customer accounted for 10% or more of total consolidated sales" in any of the last three fiscal years; the five largest customers were only ~20% of FY2025 net sales.

Contract structure: mostly book-and-ship aftermarket (recurring by aircraft fleet activity, not take-or-pay). Backlog ("remaining performance obligations") was $2,622.6M at Apr 30 2026, of which $1,177.0M recognizes in the rest of FY2026 and $1,445.6M thereafter (majority FY2027). The recurring nature is structural: parts wear out on a flight-hour/cycle clock regardless of new-aircraft deliveries.

The number that defines the company: revenue grew from $26.2M (FY1990) to $4,485.0M (FY2025) — a ~16% 35-year CAGR — and net income from $2.0M to $690.4M (~18% CAGR), since current management took control in 1990. ~107 acquisitions over that span. This is a serial compounder, not a single-product story.

Lens 2 · Supply Chain

HEICO's supply chain is deliberately shallow and that is the moat — it is the disruptor sitting between the OEM and the operator, not a link beholden to one.

Upstream (inputs): raw materials (specialty alloys, titanium, electronic components, silicone, composites), machining/fabrication inputs, and acquired subsidiaries' own input bases. No single-source choke disclosed as material; the FY2025 10-K flags general supply-chain/inflation risk under "Health Emergencies" and macro factors but names no critical single supplier. Inventory $1,410.5M at Apr 30 2026 (finished $747.9M, WIP $142.9M, materials $519.7M) — built ahead of backlog.

The company itself: >100 decentralized operating subsidiaries; the regulatory input is the FAA itself — HEICO holds ~20,000 PMAs and adds 400-550 per year. The FAA approval is the scarce upstream asset.

Downstream (named buyers/channels):

• Jet-engine OEMs it competes against (and whose installed base it feeds off): General Electric / CFM International, Pratt & Whitney (RTX), Rolls-Royce — historically "the sole source of substantially all jet engine replacement parts for their jet engines". HEICO is the largest independent alternative.
• Strategic partner / co-owner: Lufthansa Technik AG owns the 20% noncontrolling interest in HEICO Aerospace Holdings Corp. — i.e., one of the world's largest MRO providers is a partner inside FSG, both a distribution channel and a validation of the parts.
• End operators: global commercial/cargo airlines, U.S. DoD and allied militaries (defense replenishment cycle), space programs.
• Distribution: Wencor (acquired 2023) added value-added distribution of high-use commercial & military aftermarket parts.

Chokepoint assessment: the binding constraint is FAA certification throughput + engineering talent to reverse-engineer parts, not a physical supplier. That is a regulatory/know-how moat, not a fragile node.

Lens 3 · Competitive Advantages (moats)

HEICO has one of the cleaner moats in industrials, stacked from four sources:

1. Regulatory + reverse-engineering scale (the core). ~20,000 FAA PMAs developed, +400-550/yr. Each PMA is a sunk-cost, multi-year engineering + certification effort. The library compounds; a new entrant would need decades. HEICO is explicitly "the largest independent supplier of non-OEM jet engine and aircraft component replacement parts".
2. Cost-and-trust position vs. OEMs. HEICO competes "principally on price and service" where parts are interchangeable — it undercuts OEM list prices materially while carrying a 25-year reliability track record airlines trust. The OEM's own incentive (protect high-margin aftermarket) makes them slow to price-match, leaving HEICO a durable wedge.
3. Bargaining power = low customer concentration + mission-critical, low-cost-of-failure-relative-to-aircraft. No 10% customer; five largest = 20%. A HEICO part is a tiny fraction of an aircraft's operating cost but flight-critical — that is pricing power without price gouging (HEICO notably said "sales price changes were not a significant contributing factor" to FY2026 growth — it is taking volume/share, not just price ).
4. Acquisition machine + decentralization. ~107 deals since 1990, run as autonomous subsidiaries with founders kept in via redeemable noncontrolling interests (Put Rights through fiscal 2036). This aligns acquired managers and keeps the entrepreneurial culture — a replicable, durable capital-allocation moat.

Bargaining power over suppliers: high (commoditized inputs, no single-source dependency disclosed). Over customers: high on the long tail, moderate vs. the largest MRO/airline buyers (who could in theory in-source, but rarely do).

The honest caveat (developed in Lens 12/13): the moat is real and durable, but it is also fully recognized by the market — see valuation.

Lens 4 · Segments

All figures, FY2025 10-K + Q2 FY2026 10-Q.

By segment — FY2025 full year:

By segment — H1 FY2026 (six months ended Apr 30 2026):

Q2 FY2026 alone: FSG op margin hit 26.2% (+19% organic), ETG op margin 26.5% (+17% organic) — both segment records.

By product line (FSG, H1 FY2026): Aftermarket replacement parts $1,084.2M (62%), Repair/overhaul $422.5M (24%), Specialty $242.7M (14%). Aftermarket parts grew fastest (+17%) with favorable mix lifting gross margin.

By industry (H1 FY2026, before intersegment): FSG = Aerospace $1,301.5M / Defense & Space $405.8M / Other $42.2M. ETG = Defense & Space $388.0M / Other $240.9M / Aerospace $201.4M. Aerospace (commercial) ~$1.50B and Defense&Space ~$0.79B consolidated — commercial aftermarket is still the bigger engine, with defense/space the accelerating second leg.

Geography: not broken out by region in the interim filing beyond foreign-currency-translation footnotes; FCF and revenue are USD-reported, majority US with foreign commercial/military exposure.

Trend & cause: Every line is accelerating. FSG margin +170bps YoY in H1 on mix + SG&A leverage; ETG margin +50bps H1 / +370bps in Q2 on volume + favorable aerospace mix. Cause = post-pandemic commercial-aviation aftermarket super-cycle (older fleets flying more, sparing demand) + global defense replenishment + acquisitions. This is not a one-quarter pop; it is a multi-quarter acceleration off the Wencor integration.

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Phase B — Measure performance

Lens 5 · Earnings Result (latest print — Q2 FY2026, reported May 27 2026)

A clean, large beat — among the best prints in the company's history.

• Revenue: $1,375.7M, +25.3% YoY. Record.
• EPS (diluted): $1.66 vs. consensus ~$1.33 — a ~25% beat. Up 48% YoY from $1.12.
• Operating income: $350.4M, +41.2% YoY; op margin 25.5% vs 22.6%.
• Net income to HEICO: $233.8M, +49%.
• EBITDA: $408.3M, +37% YoY.
• Drivers: both segments at record margins; FSG +19% organic, ETG +17% organic; acquisitions added ~$58.3M.
• Gross margin: 41.4% vs 39.9% — ETG +270bps on favorable aerospace mix, FSG +80bps.
• Guidance/tone: HEICO gives no numeric EPS guidance (long-standing policy). Qualitative Outlook: "increased net sales at both the FSG and ETG… supported by underlying demand… and contributions from recent acquisitions". On the call, Co-CEO Victor Mendelson said HEICO is "firing on all engines," citing record/near-record orders across most large markets, strong commercial demand, defense replenishment, expanding space activity.
• Balance-sheet flags: AR up to $735.0M (collections timing), inventory $1,410.5M (building for backlog), trade payables $293.7M; net working-capital use of $173.5M in H1 — normal for a 20%-growth year. Nothing anomalous.
• Market reaction: stock surged on the print; HEI common was ~$345 late May, with the all-time high $358.04 set Jan 15 2026. The market was already pricing excellence, so the beat sustained rather than re-rated — consistent with a name where good news is expected.

Unusual vs. own history? Yes, positively — Q2 organic growth (18% consolidated) and segment margins (both >26% op) are at/near record. The effective tax rate ticked to 21.2% (Q2) from a benefit-aided 17.1% H1 (smaller stock-option tax benefit) — a headwind to GAAP EPS comparisons, worth noting.

Lens 6 · Earnings Calls (sentiment trend)

No transcripts/ on disk; grounded from web call coverage.

• Tone is at a multi-year high and rising. Q2 FY2026: "firing on all engines," record/near-record orders in most largest markets. The recurring 2025-26 phrasing is "record" (sales, op income, net income, backlog), organic strength "across all product lines," and defense/allied "replenishment" + space "expanding."
• Shift over time: the FY2023-early-FY2024 calls were dominated by the Wencor integration narrative (deleveraging, synergy capture). By FY2025 the language pivoted to broad-based organic acceleration — i.e., management stopped talking about a single deal and started talking about across-the-board demand. That is a healthy progression: from "we bought growth" to "the base is compounding."
• What they stopped saying: less emphasis on supply-chain/labor constraints that pressured 2022-23 aerospace; less on integration risk. What they kept saying: disciplined-acquisition pipeline ("we intend to continue evaluating acquisition opportunities consistent with our strategic objectives" ) and capital-allocation balance.
• Sentiment read: unambiguously positive, but the bar management has set ("record" every quarter) is itself a risk — any quarter that isn't a record reads as a disappointment regardless of absolute strength.

Lens 7 · Comps

Aerospace-aftermarket / defense peer table. Multiples are with date, or n/a. HEICO's own financials are.

Read: HEICO trades at a large premium to TransDigm, the only true structural comp — ~60x vs ~39x P/E, ~31-40x vs ~21x EV/EBITDA. The market is paying up for (a) HEICO's lower leverage and family-steward culture vs. TransDigm's PE-style leverage, and (b) HEICO's faster organic growth right now. Versus the broad Industrials sector (~30x), HEICO's P/E is ~110% above average. Versus its own 5-year average forward P/E (~55.7x), it is modestly rich (~60x). 5-yr-avg ROE: n/a (ROE is high-teens/low-20s given $690M NI on $4.4B equity ≈ 16%, but a clean 5-yr average is not sourced — flag, do not fabricate).

Lens 8 · Stock-Price Catalysts (last 5 years, >5% moves)

Mostly; pattern read is the analytical payoff.

• 5-yr total return (to Oct 31 2025): HEI common $100→$304.20 (+204%), HEI.A $100→$266.78 (+167%), vs NYSE Composite $172.65 and Dow Jones US Aerospace $329.22. Note: HEICO beat the broad market handily but slightly trailed the defense/aerospace index over this window — the supercycle lifted peers too.
• What moves the stock:
• Earnings prints — the dominant catalyst. Q2 FY2026 surged on the 25% beat. The recurring pattern: HEICO beats, stock holds/pops; an in-line "only-great" quarter can sell off because the bar is record-every-quarter.
• The Wencor deal (May 15 2023, $2.05B) — largest-ever acquisition; a step-change catalyst that re-rated the growth algorithm.
• COVID and recovery (2020-2022) — the aftermarket cratered when fleets were grounded, then snapped back as flight hours recovered; HEICO's 2020 was its rare down year, and the 2021-25 recovery is the spine of the 5-yr return.
• Defense-budget / replenishment headlines — increasingly a driver as defense/space hit ~31% of sales.
• Macro/rate — as a ~60x multiple stock, HEICO is duration-sensitive; rate moves swing the multiple.
• Pattern conclusion: the market reacts to organic-growth rate and margin trajectory far more than to absolute beats — because the premium is an organic-compounding premium. The single most dangerous catalyst is a print showing organic growth decelerating from high-teens toward mid-single-digits (a "supercycle is normalizing" tape).

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Phase C — Judge people & books

Lens 9 · Management

One of the best-regarded steward-operator teams in US industrials — and a textbook founder-family compounder, now in a generational handoff.

1. Track record (quantified): Current management (the Mendelson family) took control in 1990 and grew revenue from $26.2M to $4,485.0M (FY2025) — ~16% CAGR over 35 years — and net income from $2.0M to $690.4M (~18% CAGR), via organic growth + ~107 disciplined acquisitions. This is one of the great long-run compounding records in the sector.
2. Tenure & skin in the game: Generational transition just happened. Laurence (Larry) Mendelson (patriarch, architect of the 1990 turnaround) handed the CEO baton to his two sons in May 2025: Eric A. Mendelson (60) and Victor H. Mendelson (58) are now Co-Chairmen and Co-CEOs; Eric runs FSG, Victor runs ETG. They jointly serve as the CODM. Both have been with HEICO since 1990/1992. Insider/family ownership: Mendelsons own ~7.6% of economics but control ~87% of voting power via the high-vote Common; family + management/employees hold ~20% of common votes, and >25% of total votes are held or influenced by the family — effectively control. Third generation already inside: David Mendelson is VP of Acquisitions. High alignment; entrenched control.
3. Capital-allocation history: Elite. The decentralized acquire-and-hold model (>100 autonomous subsidiaries, founders retained via redeemable NCIs / Put Rights through 2036 ) has compounded at high returns. They use leverage opportunistically (Wencor) but deleverage fast — total-debt-to-cap fell from 38% (FY2024) to 33% (FY2025), even while H1 FY2026 added $821M of deals (debt/equity back to 53.3% mid-year, a temporary acquisition-funded tick ). 94 consecutive semi-annual dividends since 1979, $.12/share (+9% YoY) — a token yield, by design: they reinvest. ROE ≈ 16%; clean ROIC time-series n/a.
4. Red flags (governance): The dual-class structure is the main one — ~7.6% economic ownership controlling ~87% of votes means minority holders have effectively no governance recourse. Comp is reasonable for the sector. Related-party: Mendelson International Corporation (a family private-investment vehicle) is a HEICO shareholder — disclosed, not abusive. No strategy pivots; no promotional behavior (HEICO is famously low-key — no EPS guidance, no hype).
5. Founder vs. professional manager: Founder-family archetype through and through — long-termist, owner-operator, culture-driven. The implication for this stage: continuity of the winning model, but key-man/family-succession risk now that the founder has stepped back. The sons are deeply experienced, so the transition risk is low — but it is real and worth one of the management questions.

Lens 10 · Forensic Red Flags

Acting as a forensic analyst across the three statements — HEICO's accounting is conservative and clean, but there are three structural items to understand (not allegations — features of the model).

• Revenue recognition: Mostly point-in-time (book-and-ship aftermarket); a minority uses over-time recognition (contract assets $131.6M; net contract liabilities $71.6M). Standard, well-disclosed. No channel-stuffing tells: inventory $1,410.5M and AR $735.0M both rose with 20% revenue growth, roughly proportionate (AR days ~49, not stretching).
• Cash vs. earnings: High quality. H1 FY2026 operating cash flow $470.6M vs net income from consolidated ops $455.1M — OCF > net income, with D&A $107.6M and SBC $22.5M as the main non-cash adds, partly offset by $173.5M working-capital build for backlog. FCF ≈ $439M H1. No earnings-without-cash divergence.
• Goodwill & intangibles — the item to watch. Acquisition-heavy by design: goodwill $4,197.4M and intangibles (net) $1,715.2M = $5.91B, ~62% of $9.59B total assets. FY2026 deals alone added $542.4M goodwill + $178.7M customer relationships + $121.4M IP. This is normal for a serial acquirer, but it means (a) reported tangible book is thin, (b) a botched large deal could trigger impairment, and (c) GAAP EPS is suppressed by amortization ($76.7M H1, rising to ~$163M/yr FY2027 ) — bulls rightly look at cash earnings, but that is also where a serial acquirer can flatter the story. HEICO does not lean on aggressive non-GAAP; it reports clean GAAP EPS, which is to its credit.
• Redeemable noncontrolling interests / Put Rights — the structural quirk. $536.7M of redeemable NCI, with Put Rights exercisable through fiscal 2036 at fair value or earnings-multiple formulas. This is the engine of the decentralized model (founders keep equity, can put it later) but it is a real future cash claim sitting in mezzanine equity, and the "adjustments to redemption amount" flow against retained earnings ($21.5M H1). Understand it; it is disclosed and benign, but it complicates the capital structure.
• SBC: $22.5M H1 (up from $10.7M) — rising but modest (~0.9% of sales); does not materially flatter earnings. Stock-option exercises drive a swingy discrete tax benefit ($22.3M H1) that makes the effective tax rate volatile quarter to quarter — a modeling nuance, not a red flag.
• Leases / contingencies: Contingent consideration (earn-outs) $53.4M, Level 3 fair-valued; standby LCs/guarantees $15.3M. Immaterial.

Regulatory findings (required sub-section):

• SEC Litigation Releases / AAERs: None. "No LR found" and "No AAER found" for HEICO 2021-2026 via EDGAR EFTS.
• Non-SEC enforcement (FTC/DOJ/FDA): Web search surfaced no material recent enforcement, consent decree, fine, or penalty against HEICO. The notable historical item is the United Technologies / Pratt & Whitney litigation settled in 2000 — a commercial IP/antitrust-flavored dispute (an OEM challenging PMA parts), settled, not a regulatory enforcement action. Relevant as context for the business model (OEMs have historically litigated against PMA suppliers) but not an open liability.
• 10-K Item 3 / Litigation note: "The Company is involved in various legal actions arising in the normal course of business… management is of the opinion that the outcome of these matters will not have a material adverse effect".
• Conclusion: No material regulatory or legal findings — verified via SEC EDGAR EFTS (LR, AAER), web search, and 10-K/10-Q Item 3 / Litigation note as of 2026-06-21.

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Phase D — Project & stress-test

Lens 11 · Forward Projection (EPS, next three fiscal years — FY2026/27/28; FY ends Oct 31)

Built bottom-up from FY2025 actuals + H1 FY2026 run-rate + the no-guidance qualitative outlook. All outputs with arithmetic; inputs labeled.

Anchor: FY2025 diluted EPS $4.90 on $4,485.0M revenue. H1 FY2026 diluted EPS already $3.01 (+30% YoY).

FY2026 (base):

• Revenue: H1 was $2,554.3M (+20%). Assume H2 organic moderates slightly but acquisitions (4 closed + the announced military track-systems deal ) sustain 18-19% full-year growth → **$5.30B**.
• Margin: op margin trending to ~24% full-year (H1 23.9%, Q2 25.5%). Net margin to HEICO ~16.5% (H1 16.6%).
• EPS base: ~$5.85. Bull ~$6.05, Bear ~$5.60.

FY2027 (base): Revenue ~$6.05B; op leverage continues modestly. EPS base ~$6.85. Bull ~$7.30, Bear ~$6.30.

FY2028 (base): Revenue ~$6.75B. EPS base ~$7.85. Bull ~$8.60, Bear ~$7.00.

Key input lines: industry growth — commercial-aftermarket supercycle decelerating from high-teens to high-single/low-double digits over the window; share gains — continued PMA additions (400-550/yr); price — minimal (HEICO takes volume not price ); cost — input inflation manageable, SG&A leverage positive; financing — interest expense ~$130M/yr, falling rate on revolver (5.0% ); dilution — minor (~1%/yr) plus NCI/Put-Right buy-ins that raise HEICO's share of earnings.

The honest framing: at ~$337 and base FY2027 EPS ~$6.85, the stock is ~49x two-years-out earnings. Even on bull FY2028 ~$8.60, it is ~39x three-years-out. The earnings will likely compound at ~15-18%; the question is entirely the multiple, not the business.

(No forecast.ts create in watchlist/breadth mode per skill rules — base call logged here for the record, not committed to the Brier tracker: "HEI FY27 diluted EPS ≥ $6.50", subjective p≈0.70.)

Lens 12 · Bull vs Bear

Bull case. HEICO is a rare "compounder you can hold for a decade" — a regulatory-moated, family-stewarded, serially-acquisitive aftermarket machine with a 35-year ~16% revenue / ~18% net-income CAGR. Right now it is accelerating, not maturing: 18% consolidated organic in Q2, record segment margins (>26% op), record $2.62B backlog, on three simultaneous tailwinds — a commercial-aftermarket supercycle (old fleets, deferred new-build, more flight hours), global defense replenishment, and expanding space. The acquisition pipeline is deep and disciplined (Wencor already exceeding the $724M/$153M plan ), leverage is low (33% debt/cap at FY25 ), and management owns the culture. Cash conversion is pristine (OCF > NI). Earnings should compound mid-to-high-teens for years.

Bear case (permanent-impairment-grade risks).

1. The multiple is the whole bet. At ~60x forward / ~31-40x EV/EBITDA, HEICO discounts a decade of flawless compounding. There is no margin of safety in the price; the business can do everything right and the stock can still fall 30%+ on multiple compression alone.
2. Aftermarket-supercycle normalization. ~62% of FSG is commercial aftermarket parts; the current high-teens organic rate is partly cyclical (post-COVID catch-up). When fleet utilization and sparing normalize — and especially if a wave of new-build deliveries (Boeing/Airbus rate recovery) eventually retires older aircraft that HEICO services — organic growth could halve, and at 60x that re-rates violently.
3. OEM counterattack on PMA. The OEMs (GE, RTX/Pratt, Rolls) have every incentive to defend their high-margin aftermarket — via pricing, via bundling parts+service contracts that exclude PMA, or via litigation (as Pratt did pre-2000 ). A structural shift in OEM aftermarket strategy is the single most dangerous business (not multiple) risk.

Pre-mortem (18 months out, thesis broke — what happened?): Most likely: commercial organic growth decelerated from 18% to ~6% as the supercycle cooled and a large airline customer pushed maintenance out; the stock, priced for perpetual high-teens, fell from ~60x to ~40x forward = a ~30% drawdown even though EPS still grew. Second-most-likely: a large, out-of-character acquisition disappointed and forced a goodwill writedown, denting the unblemished M&A record that justifies the premium.

Are multiples too high? On any classical metric, yes — ~60x P/E, ~110% above the Industrials sector, modestly above its own 5-yr average. The bull retort (real): HEICO has traded "expensive" for 20 years and compounded through it, so static multiples mislead. Both are true; the resolution is position sizing and entry discipline, not a binary verdict.

Contrarian view (what the market refuses to see): The market treats HEICO as a perpetual-motion compounder and prices it as nearly risk-free duration. What it under-weights is that a meaningful slice of the current growth rate is cyclical aftermarket catch-up, not structural — so the "quality premium" is partly a "cyclical-peak premium" in disguise. The contrarian read isn't that HEICO is a bad company (it's a great one) — it's that the probability-weighted forward return from ~$337 is mediocre because excellence is fully priced and the cycle is closer to peak than trough.

Lens 13 · Devil's Advocate (short-seller)

Dismantling the bull case — where could this structurally break?

• Revenue concentration / cyclicality: Not customer-concentrated (good — 5 largest = 20% ), but end-market concentrated in the commercial-aviation cycle. ~$1.5B of H1 sales is Aerospace; if global air-traffic growth stalls (recession, fuel shock, another health emergency — explicitly a named risk factor ), the aftermarket cycle turns and HEICO's organic rate collapses. The 2020 COVID year is the proof of cyclicality the bulls wave away.
• Why the moat may be weaker than bulls think: PMA is a known model now; OEMs have spent 20 years building "power-by-the-hour" service contracts that lock airlines into OEM parts and exclude PMA. As those contracts penetrate, HEICO's addressable aftermarket shrinks at the margin. HEICO's moat is real on legacy platforms but harder to extend onto newest-generation engines (GTF, LEAP) where OEM service-contract penetration is highest and PMA development is slower/costlier.
• Most dangerous competitor bulls underestimate: Not another PMA shop — it's the OEMs themselves (GE Aerospace, RTX/Pratt) weaponizing aftermarket service agreements, plus a more leveraged TransDigm that could outbid HEICO for the best aftermarket assets and compress the M&A returns HEICO depends on.
• Worst capital-allocation / governance items: The dual-class structure (~7.6% economic ownership controlling ~87% of votes ) means minority holders cannot discipline management if the third generation is less able than the second. The redeemable NCI/Put-Right web ($536.7M, exercisable through 2036 ) is a deferred cash claim that could become a meaningful use of cash in a downturn precisely when cash is scarce. And goodwill+intangibles = 62% of assets — one bad megadeal impairs the record.
• Assumptions that must hold for today's price: (1) high-teens organic persists for years (cyclical-peak assumption); (2) the M&A pipeline stays accretive at fair prices indefinitely (gets harder as HEICO scales — $5.3B revenue needs ever-bigger deals to move the needle); (3) the multiple stays ~60x (rate/sentiment-dependent).
• What if growth disappoints 20-30%? If FY2027 organic comes in at ~6% instead of ~12%, EPS lands ~$6.30 not ~$6.85, and the multiple compresses to ~40x → ~$252, a ~25% downside from ~$337. The asymmetry from here is unfavorable: limited upside if everything goes right (already priced), real downside if the cycle cools.
• Single scenario that permanently impairs the business: A structural OEM victory in aftermarket lock-out on next-gen platforms combined with a botched large acquisition impairment — i.e., the growth algorithm (organic + M&A) breaks on both legs at once. Plausibility: low-to-moderate over 3 years, but non-trivial over 10.

Lens 14 · Management Questions (ordered by information value)

1. What share of FSG aftermarket revenue is on legacy engine platforms (CFM56, V2500, CF6) vs. next-gen (LEAP, GTF), and what is your PMA-development roadmap and timeline for the next-gen installed base where OEM power-by-the-hour penetration is highest?
2. How much of the current ~18% FSG organic growth do you attribute to durable share gains vs. cyclical post-pandemic aftermarket catch-up — and what does "normalized" organic growth look like through a full cycle?
3. As HEICO scales past $5B in revenue, how do you keep acquisitions moving the needle without raising deal size and price — and at what point does the law of large numbers force a change to the disciplined-tuck-in model?
4. With the generational CEO transition complete, how is decision-making split between the two Co-CEOs, and what is the succession plan and bench depth below you (including the third generation)?
5. What is your actual return-on-invested-capital on acquisitions over the last 5 and 10 years, and how do you measure it net of the goodwill/intangibles carried?
6. How are OEMs changing their aftermarket service-contract strategies, and where are you seeing PMA parts actively excluded — quantify the addressable-market impact.
7. What is the trajectory of the redeemable noncontrolling-interest / Put-Right obligations through 2036, and how do you fund them in a downside scenario?
8. Wencor is "exceeding" the original $724M/$153M plan — what are the actual revenue/EBITDA now, and what did you learn that changes how you'll integrate the next large deal?
9. Given a ~60x multiple, would you ever buy back stock, and how do you think about the cost of equity when issuing Class A shares for acquisitions?
10. How exposed is the defense/space ~31% of revenue to specific programs and budget lines, and how durable is the current "replenishment" tailwind?
11. What inning is the commercial-aftermarket cycle in, by your read of fleet age, retirement rates, and new-build delivery recovery?
12. Where are you investing R&D ($68.4M H1, rising) for the next decade of PMA and ETG products, and what's the expected payback?
13. How do you think about leverage capacity for a transformational acquisition vs. protecting the balance sheet (33% debt/cap target zone)?
14. What is the single biggest risk to HEICO's business model that you don't think the market is paying attention to?
15. If you could only grow one segment over the next five years — FSG aftermarket or ETG electronics — which compounds shareholder value faster, and why?

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