DUCOMMUN INCORPORATED (DCO): what the price assumes

In the published model solve dated 2026-Q2, anchored at $176.30, DUCOMMUN INCORPORATED (DCO) is priced for today's economics sustained for ~11.3 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/DCO

Headline

What The Price Assumes (Inversion)

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

Solve inputs: computed at a 9.1% cost of capital; growth searched up to the 25% self-funding ceiling.

How unusual the bet is: n/a

Valuation X-Ray

Every valuation family lands below the price. The price therefore sits 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.

Families that call it expensive: Asset

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=4)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

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

• Military and space programs carry 58% of revenue and commercial aerospace another 37%, and the company builds to other people's designs through subsidiaries "organized into two strategic businesses, Electronic Systems and Structural Systems", so its results track the primes' production rates more than its own pricing power.
• A single quarter in late 2025 pushed an otherwise profitable year into an operating loss, and the latest quarterly filing records that management "restated our audited consolidated financial statements for the year ended December 31, 2025", which means the reported track record itself has been revised once already.
• The next real read is the second-quarter report scheduled for August 6, 2026, which will show whether the two profitable quarters since the charge are the run rate or the exception.

Bull Case

Look at the last twelve months and this company lost money at the operating line. Look at the last two reported quarters and it did not. Almost the whole trailing loss sits in one quarter, the third of 2025, and both quarters filed since have come back with operating profit, about 16.9 million dollars and then about 15.7 million dollars. Measured across a full cycle rather than across that one quarter, the operating margin comes out near 5.3%. Which of those two numbers describes the business is what the bull case is actually arguing about.

The company itself is unglamorous and specific. Electronic Systems "designs, engineers and manufactures high-reliability electronic and electromechanical products" that go inside defense and aerospace platforms; Structural Systems makes the metal and composite assemblies that hold aircraft together. The 10-K puts the top line plainly: "the Company's consolidated net revenues for the year ended December 31, 2025 were $824.7 million, of which the majority was recognized over time". Recognizing revenue over time means the shop books it as work progresses rather than at delivery, and it is why the balance sheet carries a large receivable-like asset for work performed but not yet billed.

That asset has been building. Contract assets stood at $249.8 million at the end of 2025 against $200.6 million a year earlier, an increase the filing attributes primarily to a net increase of products in work in process. For a build-to-print supplier, more work in process is the least ambiguous evidence available that the primes are pulling parts. The order book behind it comes largely from long-term agreements, and the filing is careful to say that "Backlog is subject to delivery delays or program cancellations", which is honest and also the standard condition of the industry.

The margin gap to the cohort is where the upside lives, and it is a large gap. ATRO, closest in size at $886.8 million of trailing revenue, runs a 10.2% operating margin. HXL runs 9.5% and DRS 9.9% while growing revenue 10.5%. A full-cycle 5.3% against those numbers is not a demand problem, because the same programs feed all of them; it is a cost and mix problem inside the four walls. The heavy restructuring spending that goes with fixing such a problem is largely behind: charges ran $2.2 million in 2025 against $31.4 million cumulative since the program began.

Time is the resource a turnaround needs most, and the refinancing bought a lot of it. "The 2025 Term Loan is a $200.0 million senior secured loan that matures in November 2030." Alongside it sits a 450.0 million dollar revolving facility running to the same date, of which 344.8 million dollars was unused at year end, and the filing states that "As of December 31, 2025, we were in compliance with all covenants required under the 2025 Credit Facilities." Nobody is forcing this management to fix the margin by next quarter. The bull case is that they get four more years to do it and the parts keep shipping while they work.

Bear Case

Here is the thing a holder has to sit with. Over the trailing twelve months this business did not earn an operating profit, and the one year it did report was subsequently restated. Everything else in the bear case is a variation on those two sentences.

Start with where the price sits against the methods rather than with what the price assumes. Peer-multiple approaches put the price roughly 64% above where that family lands. The forward-growth method that reaches closest still leaves the price about 45% above it, and it reaches even that far only because its base scenario keeps today's revenue multiple flat instead of compressing it. Book value plus profitability, the asset family, sits furthest away: the price is more than four times where that lens lands. No family of method reaches today's quote. That is not a disagreement among approaches; it is unanimity in one direction.

The peer numbers say the same thing from the other end. A full-cycle 5.3% operating margin is roughly half of what ATRO earns and roughly half of HXL. To be fair to the bull, MRCY is running a 1.0% operating margin on $967 million of revenue, so the electronics side of this cohort has broadly struggled. But the market is not pricing this name like a struggling supplier. Today's price works out to roughly 66 times what this business earns in operating income in an average year across the cycle, and it would take something close to twelve years of growth running at the fastest pace the company can fund from its own cash flow to grow into that. Only about 14% of comparable fast growers have sustained such a pace even a decade. That solve is a single indicative calculation under fixed assumptions, so treat the twelve years as a direction rather than a measurement, but the direction is not subtle.

The mechanism that could break it is disclosed in the 10-K in one sentence: "In many cases, we make multi-year firm, fixed-price commitments to our customers, without assurance that our anticipated production costs will be achieved." That is precisely the shape of what happened in the third quarter of 2025. When a supplier locks price for years and then discovers the cost, the correction arrives all at once and lands in a single quarter.

Who sits across the table is getting more concentrated too. The 10-K footnotes that "Boeing completed its acquisition of all of Spirit Aerosystems Holdings, Inc.'s Boeing-related commercial operations, based on Boeing's announcement on December 8, 2025." and that TransDigm closed its purchase of the Simmonds Precision business from RTX in October 2025. Fewer, larger buyers negotiating multi-year fixed prices against a supplier that has just demonstrated it can misjudge its own costs is not a favorable trade.

Then there is the accounting itself. The restatement was not a rounding matter of presentation: "The correction for the Error impacted (i) selling, general and administrative expenses, (ii) accrued and other liabilities, (iii) other long-term liabilities, and (iv) additional paid-in capital." Four line items, including the expense line and equity. Investors underwriting a margin recovery are underwriting a set of books that has already been revised once.

The balance sheet does not amplify the risk so much as it removes the cushion. Net borrowings sit at about 5.89 times operating profit measured across the cycle, which is manageable against a full-cycle year and considerably less manageable against a trailing year that lost money. The share count has meanwhile risen about 6% a year over the four years to April 2026, so the per-share claim on any eventual recovery keeps getting a little thinner while the recovery is being waited for.

Valuation

Every family of method used to triangulate this business currently lands below the traded price, which is the simplest fact in the file and the one that frames the rest. Peer-multiple approaches leave the price about 64% above that family. The forward-growth approach, the one designed to credit tomorrow rather than yesterday, still leaves it about 45% above. The asset family, book value plus profitability, sits more than four times below. When no family reaches the price, the price is a bet standing outside what any of these standard frames encode.

What that bet requires can be stated arithmetically. Today's $176.58 works out to roughly 66 times what the business earns in operating income in an average year across the cycle, and clearing that would take on the order of twelve years of growth held at the fastest pace the company can fund from internal cash flow. Each extra percentage point of growth shortens the requirement by a little over two years, which is a useful sensitivity and also a warning about how much rests on the growth input. The band behind this calculation is low-reliability, so the twelve years is indicative rather than measured.

The basis matters here more than usual. Over the trailing twelve months the operating margin was about negative 3%, because that window still contains the third-quarter 2025 charge. On the company's own through-the-cycle economics applied to current revenue, it is about 5.3%. Those are two different questions, and the price is being asked to clear the second one, not the first. Against filed revenue of "$824.7 million" for 2025, a full-cycle 5.3% is roughly 45 million dollars of operating income. That is the profit stream the entire market value is resting on.

Cohort position sharpens it. ATRO, the nearest comparable by size, converts $886.8 million of revenue into a 10.2% operating margin. HXL manages 9.5% and DRS 9.9%. This company's full-cycle figure is roughly half of any of them, which means the peer-multiple methods are already being generous: they are applying cohort multiples to a business earning cohort-lagging economics.

Solvency sets the floor under all of it, and it is adequate rather than comfortable. Net borrowings run about 5.89 times operating profit on a full-cycle basis. The maturity wall is distant, with both the term loan and the 450.0 million dollar revolver running to November 2030, and 344.8 million dollars of that revolver was undrawn at the end of 2025 with the company reporting compliance with all covenants. What the balance sheet does not do is add anything to the value: the share count has been rising about 6% a year over the four years to April 2026, so each year of waiting costs current holders a slice of whatever the recovery eventually produces.

Catalysts

The next dated event is close. Ducommun announced on July 23, 2026 that it will hold its second-quarter conference call, with results scheduled for August 6, 2026. That print matters more than a typical quarter because it is the third consecutive period since the third-quarter 2025 charge. Two clean quarters can be a recovery or a pause; three starts to look like a trend line, and the segment margin detail inside the release is where the answer sits.

The sell side has already split on it. Citi raised its price target to $216 from $167 in early July 2026, and roughly a week later RBC Capital cut the stock to Sector Perform from Outperform. Two desks moving in opposite directions inside a fortnight, on the same public filings, is a reasonable proxy for how much of this name's value depends on which margin number one believes.

The filed record also refreshed recently. The restated annual report went in on May 8, 2026 and the first-quarter report followed on May 12, 2026, showing operating income of about 15.7 million dollars for the quarter ended April 4, 2026. Restatements typically bring remediation work and auditor attention with them, so the disclosure around internal controls in the next annual filing is worth reading closely even though it will not arrive until early next year.

Peer Cohorts (Per Segment, With Filing Citations)

Electronic Systems (reported)

• DRS (Leonardo DRS, Inc.)
• FY2025 10-K: …ship propulsion systems, motors and variable frequency drives, force protection systems, and transportation and logistics systems for the U.S. military and allied defense customers. DRS is a leading provider of next-generation electrical propulsion systems for the U.S. Navy. We provide power conversion, control,…
• FY2025 10-K: …architectures. Within ASC, we are increasingly combining sensing, computing, and software to support applications such as C-UAS, electronic warfare, and networked sensing, where performance depends on the ability to detect, process, and act on data in real time. These integrated capabilities are designed to support…
• KTOS (Kratos Defense & Security Solutions, Inc.)
• FY2025 10-K: …property and past performance qualifications and by offering a wider range of comprehensive low-cost technology leading and proven products and solutions compared to our competitors. In regard to areas of specialization, our product and solution offerings include the manufacturing of specialized defense electronics;…
• FY2025 10-K: …address these threats for and with our customers and partners is recognized in the industry. We believe that the Company's military grade hardware, software and solution offerings, including jet unmanned aerial drones, rocket and hypersonic systems, C5ISR and air defense systems, jet engine and propulsion systems for…
• MRCY (MERCURY SYSTEMS, INC.)
• FY2025 10-K: …by the growing demand for domestically designed, sourced and manufactured electronics for critical aerospace, defense and intelligence applications. Our primary market positioning is centered on making commercially available technologies profoundly more accessible to the aerospace and defense sector, specifically as…
• FY2025 10-K: …also saves our customers valuable time and expense, as their initial costs to integrate modules and components typically far exceed the costs of the individual product procurement. This benefit continues over time because we are continually investing R&D into our products. This allows us to provide our customers the…
• TTMI (TTM TECHNOLOGIES INC)
• FY2025 10-K: …industrial, and instrumentation markets, as well as commercial off-the-shelf (COTS) components for certain aerospace and defense customers. Reconciliations of net sales and segment operating income were as follows: For the Year Ended December 29, 2025 A&D Commercial RF&S Components Eliminations Total (In thousands,…
• FY2025 10-K: …States. The Company performs ongoing credit evaluations of customers, does not require collateral, and considers the credit risk profile of the entity from which the receivable is due in further evaluating collection risk. As of December 29, 2025, one customer accounted for 14 % of the Company's accounts receivable.…
• BHE (BENCHMARK ELECTRONICS, INC.)
• FY2025 10-K: …our customers throughout all stages of the engineering, manufacturing, and order-fulfillment processes. • Supply Chain Management. We offer full end-to-end supply chain design, inventory-management, and volume-procurement capabilities to improve access to supply, optimize cost, and reduce total cycle time. Our…
• FY2025 10-K: …from the manufacturing operations of our current and future customers, who are continually evaluating the merits of manufacturing products internally against the advantages of outsourcing to EMS providers. In addition, in recent years, ODMs that provide design and manufacturing services to OEMs, have significantly…
• PLXS (PLEXUS CORP.)
• FY2025 10-K: …oversee and provide leadership to business development and customer relationship management teams, supply chain, engineering, manufacturing and sustaining services subject matter experts and market sector specialists. These teams maintain expertise related to each market sector and execute sector strategies aligned…
• FY2025 10-K: …could result in liability claims against us, reduced demand for our services and damage to our reputation. We design, manufacture and service products to our customers' specifications, many of which are highly complex and subject to demanding regulatory environments for market sectors that generally have higher risk…
• SANM (Sanmina Corporation)
• FY2025 10-K: …also involves the planning, purchasing, transportation and warehousing of product components. We use state of the art production management systems to manage our procurement and manufacturing processes in an efficient and cost-effective manner. We collaborate with our customers to enable us to respond to their…
• FY2025 10-K: …we support our customers' logistics and repair requirements through selected certified partners around the world. Comprehensive IT Systems and Global Supply Chain Management. To manage and coordinate our global operations, we employ an enterprise-wide Enterprise Resource Planning ("ERP") system at substantially all…
• CTS (CTS CORPORATION)
• FY2025 10-K: …marketing are accomplished through our sales engineers. We also utilize independent manufacturers' representatives and distributors to extend our sales capability. See the Consolidated Financial Statements and Notes included in Part II, Item 8 of this Annual Report on Form 10-K for financial information regarding the…
• FY2025 10-K: …discussed in further detail in Item 1A. of this Annual Report on Form 10-K and other filings made with the SEC. CTS undertakes no obligation to publicly update CTS' forward-looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.…

Structural Systems (reported)

• HXL (HEXCEL CORP /DE/)
• FY2025 10-K: …produced as further discussed under the captions "Significant Customers", "Markets" and "Management's Discussion and Analysis of Financial Condition and Results of Operations". Engineered Products The Engineered Products segment manufactures and markets composite structures and precision machined honeycomb parts…
• FY2025 10-K: …system or network intrusions. We depend heavily on information technology and computerized systems to communicate and operate effectively. We store sensitive data, including proprietary business information, intellectual property, regulated data (U.S. government and other), customer data and confidential employee or…
• HWM (HOWMET AEROSPACE INC.)
• FY2025 10-K: …and equipment are recorded at cost. Depreciation is recorded principally on the straight-line method at rates based on the estimated useful lives of the assets. The following table details the weighted-average useful lives of structures and machinery and equipment by reporting segment (numbers in years): Structures…
• FY2025 10-K: …transportation market is expected to remain low with recovery beginning in the second half of 2026, given tariff-related, economic, and regulatory uncertainty in North America. Governmental policies, laws and regulations, and other economic factors, including inflation, customer requirements, tariffs, and…
• LOAR (Loar Holdings Inc.)
• FY2025 10-K: …Cost is determined primarily using the weighted-average cost method. Write-downs for slow-moving and obsolete inventories are provided based on current assessments about future product demand, production requirements for the next 12 months and usage for the last 12 months. F- 13 Table of Contents Property, Plant and…
• FY2025 10-K: …that are likely to increase over time. From time to time, we may implement new technology systems or replace and/or upgrade our current information technology systems. These upgrades or replacements may not improve our productivity to the levels anticipated and may subject us to inherent costs and risks associated…
• ATRO (ASTRONICS CORPORATION)
• FY2025 10-K: …period to period. Test Systems segment customers include the USDOD, prime contractors to the USDOD, mass transit operators and prime contractors to mass transit operators. Each of the markets that we serve presents opportunities that we expect will provide growth for the Company over the long-term. We continue to…
• FY2025 10-K: …U.S. Department of Defense ("USDOD"). Our Test Systems segment designs, develops, manufactures and maintains automated test systems that support the aerospace and defense and mass transit industries. In the Test Systems segment, Astronics' products are sold to a global customer base including OEMs and prime…
• HEI (HEICO CORPORATION)
• FY2025 10-K: …misappropriation or obsolescence from occurring by developing new techniques and improving existing methods and processes, which we will continue on an ongoing basis as dictated by the technological needs of our business. We believe that, based on our competitive pricing, reputation for high quality, short lead time…
• FY2025 10-K: …translated at period-end exchange rates, while revenue and expenses are translated using average exchange rates for the period. Unrealized translation gains or losses are reported as foreign currency translation adjustments through other comprehensive income or (loss) in shareholders' equity. Transaction gains or…
• AIR (AAR CORP)
• FY2025 10-K: …protections, the overall state of our cybersecurity program, emerging cybersecurity developments and threats, and our strategy to mitigate cybersecurity risks . ​ ITEM 2. PROPERTIES In our Parts Supply segment, we primarily operate from our headquarters in Wood Dale, Illinois, which we own. In addition to warehouse…
• FY2025 10-K: …treasury and human resources with a portion of the costs allocated to our operating segments. Significant expenses for each segment are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, 2025 ​ ​ Parts ​ Repair & ​ Integrated ​ Expeditionary ​ Supply Engineering Solutions Services Sales ​ $…
• TDG (TransDigm Group Incorporated)
• FY2025 10-K: , Plant and Equipment," for further information. Financial Instruments - Interest rate swap, cap and collar agreements are used to manage interest rate risk associated with floating rate borrowings under our Second Amended and Restated Credit Agreement dated as of June 4, 2014 (the "Credit Agreement"). These…
• FY2025 10-K: …LLC, TransDigm Inc., PNC Bank, National Association as a Purchaser and a Purchaser Agent, the various other Purchasers and Purchaser Agents from time to time party thereto, and PNC National Association as Administrator** Incorporated by reference to TransDigm Group Incorporated's Form 10-Q, filed February 5, 2014…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

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.