DUCOMMUN INCORPORATED (DCO): what the price requires

At today's price, DUCOMMUN INCORPORATED (DCO) is priced for today's economics sustained for ~11.3 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/DCO

Headline

FieldValue
TickerDCO
CompanyDUCOMMUN INCORPORATED
Current price$163.25/sh
CompositionMilitary and space 58% / Commercial aerospace 37% / Industrial 4%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin (mid-cycle)5.3%
Trailing margin (depressed year)-3.0%
Must persist for11.3y
Multiple paid62x mid-cycle operating income

Solve inputs: computed at a 9.2% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~2.2 years.

How unusual the bet is: elevated

ReferenceValue
vs own history+0.64σ
sustained it ~10 years at this level14%
implied end-window share0%

Valuation X-Ray

Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset4.01x2expensive
Earnings—0—
Relative1.51x2expensive
Growth1.47x1expensive

Families that call it expensive: Asset, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.7%); the inversion above states its own rate.

Per-Model Detail (n=5)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$0.00—noNegative/zero FCF — equity value floored at $0
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative$107.821.51xyesP/S fallback (negative EPS): Sector P/S 2.0x × TTM revenue — excluded from consensus
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$42.943.80xyesReference only (book value floor): BV/sh $42.94, ROE negative
Two-Stage Excess ReturnAsset$38.644.22xyesReference only (book value with convergence): BV/sh $42.94, ROE converges to ke
Discounted Future Market CapGrowth$110.951.47xyesRev $0.8B, growth 7% (input: historical growth; tapered), Terminal P/S: 2.5x / 3.0x / 3.5x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$0.00—noNegative/zero EPS — earnings-based value floored at $0
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$2.1077.74xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.04B × (1−15%) / WACC 8.7% → EPV (no growth) (excluded from median)
Residual IncomeAsset——no—
Graham NumberAsset——no—
EV/EBITDA RelativeRelative$0.0116324.50xyesEBITDA $0.00B × sector EV/EBITDA 14.0x (excluded from median)
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings——no—
ROIC-Justified P/BAsset$6.7824.08xyesBV $42.94 × (ROIC 1.4% / WACC 8.7%) (excluded from median)
P/Sales SectorRelative$107.821.51xyesRevenue $0.84B × sector P/S 2.0x
PEG Fair ValueRelative——no—
Earnings YieldEarnings——no—
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$264.6m
Net debt / NOPAT (after-tax)6.96x
Net debt / operating income (pre-tax)5.89x
Share count CAGR (dilution)6.1%
Burning cashyes

Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 5.3%); the trailing year was depressed.

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

Bull Case

Aerospace and defense suppliers are hard to value on trailing earnings, and Ducommun is the reason why. A tier-two supplier sits a layer below the primes, building structures and electronic assemblies that get designed into a platform years before the platform ships and then run for the decades that platform stays in service. Revenue lags the design win, margins lag revenue as a program matures from low-rate to full-rate production, and a single bad year, a 737 MAX slowdown, a restructuring charge, can push trailing operating income negative even as the order book fills. That is roughly where Ducommun has been: trailing operating profit dipped below zero, while the underlying business kept booking work. The bull case is that the trough is behind it and the design wins are turning into deliveries.

The first quarter of 2026 is the evidence. Net revenue hit a record $209.0 million, gross margin reached 26.9%, net income jumped to $9.9 million, or $0.64 per diluted share, against $0.09 a year earlier, and adjusted EBITDA margin expanded to 16.9% of revenue from 15.4%. Commercial aerospace revenue grew 18% year over year as Boeing and Airbus rates recover, and the defense side is building. Management frames the path with its Vision 2027 goal of an 18% adjusted EBITDA margin, and the latest quarter put 150 basis points of expansion on the board toward it. Margin expansion in a fixed-cost manufacturing business is operating leverage doing exactly what it should as volumes climb.

The order book is what makes the recovery durable rather than a single good quarter. Ducommun carries a backlog of roughly $1.1 billion, and the defining new catalyst is a set of multi-year missile production framework agreements that begin contributing in the second half of 2026 and intensify into 2027. Defense demand of that shape is less cyclical than commercial and tends to come with long visibility. The company has also been a serial, disciplined acquirer of more sophisticated, higher-value content, pursuing in its own words "acquiring and integrating businesses that result in broader, more sophisticated product and service offerings while diversifying and expanding our customer base and markets." A supplier moving up the value chain, with commercial recovering and defense accelerating into a filled backlog, is a credible operating-leverage story. The question the price asks is how much of it is already paid for.

Bear Case

The bear case is best read through how the valuation methods disagree, because the conservative ones are telling the honest story. Run the standard lenses against Ducommun and not one of them reaches the price. Capitalize the normalized earnings power and you get a figure a small fraction of the price, because the through-cycle margin is still thin. The asset lens, book value plus the returns above the cost of capital, lands around a quarter of the price, because the returns on capital are barely above zero. Even the peer-multiple lens, valuing the revenue at the sector's price-to-sales, sits well below where the stock trades. Only a forward model that assumes the recovery completes gets close, and it gets there by extrapolating. When every backward-looking method says expensive and only the most optimistic forward one says fair, the price is a bet on the future, not a reflection of the present.

The arithmetic of that bet is demanding. Strip the price down and it implies Ducommun grows at its self-funding ceiling for roughly 11 years on its through-cycle margins. History is unkind to that assumption: only about 14% of comparable fast-growers sustained that pace even ten years. The Vision 2027 margin target is real and progress is visible, but the price is not paying for 18% in 2027. It is paying for years of compounding on top of it. If margin expansion stalls at, say, 17%, or if the missile-agreement ramp slips a year, the forward model that justifies the price loses its footing, and the conservative methods, the ones that already say expensive, are what is left.

The customer concentration is the structural fragility underneath. Ducommun's revenue leans on a handful of primes: in 2025, RTX was 17.9% of net revenue, Boeing 13.3%, Northrop Grumman 5.8%, and Lockheed Martin 4.2%, with the top ten customers around three-fifths of the total. The company is candid that commercial revenue "could be affected as a result of changes in new aircraft orders, or the cancellation or deferral by airlines of purchases of ordered aircraft." A Boeing rate cut or a program deferral does not dent Ducommun, it reroutes the whole thesis. The balance sheet adds to the caution: net debt of about $265 million sits near six times normalized operating income, and the share count has been rising about 6% a year, dilution rather than the buybacks a confident, cash-generative supplier would run. The downside is bounded by real assets and a filled backlog, not by zero, but at this price the margin for error on the recovery is thin.

Valuation

The honest starting point is that today's trailing earnings are the wrong lens, and the framework knows it. Operating income over the last twelve months is depressed, even negative, dragged down by cycle and one-time items, so the price is read against the company's own through-the-cycle margins rather than the trough. On that normalized basis, the price works out to roughly 62 times mid-cycle operating income and implies Ducommun holds growth at its self-funding ceiling for about 11 years. That is the bet stated plainly: not a single good year, but more than a decade of compounding on recovered margins. Against history, only about one comparable fast-grower in seven sustained that kind of pace even ten years.

What makes the read stark is that no family of method reaches the price. The earnings-power lens, capitalizing normalized profit, lands far below, because the through-cycle margin is still in the mid-single digits. The asset lens, book value plus returns above the cost of capital, lands around a quarter of the price, held down by a return on invested capital barely above 1%. The peer-multiple lens, valuing roughly $840 million of revenue at the sector's price-to-sales, comes closest of the standard methods but still sits below the price. Only a forward model that credits the recovery getting completed approaches it. Read together, the pattern is unambiguous: this is a price built on the recovery and the margin target landing, not on what the business has demonstrated. The spread between the methods and the price is the premium for that completion.

Solvency frames the downside and the urgency. Net debt of about $265 million runs near six times normalized operating income, and with interest costs not separately broken out, coverage is hard to pin precisely, but the leverage is meaningful for a company whose margins are only now recovering. The 10-K notes the company began required quarterly term-loan amortization payments in the first quarter of 2026 under its 2025 credit facilities. The rising share count means equity has been part of the funding mix, which is the opposite of the capital return a fully recovered supplier would deliver. The asset base and the $1.1 billion backlog bound the downside, but the buyer here is paying for an operating-leverage story to play out on schedule, with leverage that leaves limited room if the schedule slips.

Catalysts

Ducommun's first quarter of 2026 was the cleanest evidence yet that the recovery is real. Net revenue set a record at $209.0 million, gross margin reached 26.9%, and net income climbed to $9.9 million, or $0.64 per diluted share, from $1.4 million, or $0.09, a year earlier. Adjusted EBITDA rose to $35.4 million, or 16.9% of revenue, up 150 basis points year over year, and cash from operations improved to $11.2 million from $0.8 million. Commercial aerospace led with 18% growth as Boeing and Airbus build rates recover, and both Electronic Systems and Structural Systems posted higher revenue and operating income.

The forward catalyst is defense. Management pointed to multi-year missile production framework agreements that begin contributing in the second half of 2026 and intensify into 2027, supported by robust bookings and a backlog of roughly $1.1 billion. Defense work of that shape carries longer visibility than commercial and helps smooth the cycle that has whipsawed the company's trailing earnings. The company continues to anchor its story on the Vision 2027 goal of an 18% adjusted EBITDA margin, and the quarter's margin expansion keeps it on pace toward that target.

The tension for an investor is timing against price. The operating momentum is genuine and the backlog gives it legs, but the recovery is the thing the price already assumes. The next few prints, and specifically the second-half ramp of the missile agreements and continued margin progress toward 18%, are where the market gets to check whether the schedule the price is underwriting is holding. A miss on either is the kind of stumble a richly valued recovery name does not forgive easily.

Peer Cohorts (Per Segment, With Filing Citations)

Electronic Systems (reported)

Structural Systems (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q1 2026 earnings release, May 2026 · Q1 2026 earnings call · Q1 2026 earnings release · Ducommun FY2025 10-K, customer concentration · Ducommun FY2025 10-K, debt

View the full interactive DCO report on boothcheck