HEICO Corporation (HEI): A Bull Case Theory

We came across a bullish thesis on HEICO Corporation on Compound & Fire’s Substack. In this article, we will summarize the bulls’ thesis on HEI. HEICO Corporation’s share was trading at $316.73 as of June 25^th. HEI’s trailing and forward P/E were 74.00 and 74.00 respectively according to Yahoo Finance.

Heico Corporation emerges as a disciplined compounder in the aerospace and defense space, blending consistent organic growth with a thoughtful acquisition strategy. Scoring 83.1% on the Investment Readiness Score (IRS)—above the 80% benchmark—Heico stands out for its strong insider ownership at 14% and minimal stock-based compensation of just 1%, reflecting robust shareholder alignment.

Financially sound, Heico posts a manageable 2.2x Net Debt/EBITDA and exceptional cash conversion, with operating cash flow 143% of net income. Though goodwill comprises a high 44.5% of total assets, suggesting acquisition intensity, this doesn’t mask its 10-year revenue CAGR of 14% and solid 39% gross margin. ROIC appears modest at 12%, but deeper analysis, adjusting for goodwill, could reveal stronger underlying efficiency.

The author compares HEI to contrast with TransDigm Group, which boasts a higher 15.6% ROIC and superior 59% gross margin, but its IRS falls short at 74.3% due to lower insider ownership (0.4%) and elevated leverage (4.8x Net Debt/EBITDA). TransDigm’s stronger growth and stock performance—973% over a decade vs. Heico’s 939%—highlight its aggressive strategy, but also its risk. Heico outperforms on cash efficiency, Capex/Sales (1.5% vs. 2.1%), and shareholder alignment, despite minor dilution from a 5.85% share count increase over 10 years.

The clear advantage in risk-adjusted quality and capital discipline makes Heico the preferred pick. While both firms are high-quality compounders, Compound & Fire favors Heico’s balance of growth, prudent leverage, and superior alignment, seeing it as the safer long-term bet with better downside protection—qualities that edge it ahead in this close aerospace investment contest.

Previously, we covered a bullish thesis on HEICO Corporation by Bulls On Parade in April 2025, which highlighted the company’s niche dominance, disciplined capital allocation, and steady compounding strategy. The company’s stock price has appreciated by approximately 30% since our coverage. This is because the thesis played out well. Compound & Fire shares a similar view but emphasizes financial quality using the IRS framework.

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Disclosure: None. This article was originally published at Insider Monkey.