Title: ✈️ HEICO: A 186-page Deep Dive — A serial acquisition-driven compounder Show: Compounding Quality (Substack, paid post — compoundingquality.net) — investment case contributed by Alexander of Slow Compounding Guest: Pieter Slegers / Team Compounding Quality (author of the issue) Date: 2026-07-05 URL: https://www.compoundingquality.net/p/heico-a-186-page-deep-dive Length: written post — no timestamps Note: Paid-subscriber post captured via Stephen's logged-in session. Body text verbatim; UI chrome removed. The two key data images — the Fiscal.ai onepager and the 15-metric Quality Score table — are transcribed in full below as [Table image — …] blocks at the point where they appeared. The linked 186-page PDF investment case itself is not archived.
Hi Partner 👋
Today, you will receive a full investment case of 186 (!) pages about HEICO
If you invested $10.000 in 1990, you would have $13.9 (!) million today.
This wonderful company definitely deserves your attention.
Slow Compounding
This investment case was made by my friend Alexander from Slow Compounding.
He was very kind to share it with us.
You can check out his work here:
Slow Compounding
HEICO - General Information
👔 Company name: HEICO Corporation ✍️ ISIN: US4228061093 🔎 Ticker: HEI 📚 Type: Serial Acquirer 📈 Stock Price: $ 361.7 💵 Market cap: $ 50.6 billion 📊 Average daily volume: $ 244.8 million
How does HEICO make money?
HEICO makes money by selling replacement aircraft parts, electronic components, and other specialized products for the aerospace, defense, medical, and industrial industries.
It also grows by acquiring high-quality niche businesses that strengthen its product portfolio.
The full investment case is very extensive (196 pages).
In case you don't have time to read it all right now, let's give you the highlights first.
Three main takeaways
Here are the 3 most important takeaways:
1. Market Leader
HEICO builds parts for planes. Not just any parts, but parts approved by the FAA. This is the U.S. authority that decides what's safe to fly.
[Image — FAA-approved parts. Source: Company Website]
2. Mega Serial Acquirer
HEICO has successfully completed more than 112 acquisitions since 1990.
[Image — acquisition history. Source: Company Website]
3. Strong Compounder
HEICO has consistently compounded shareholder value over the long term.
[Image — long-run total return. Source: Fiscal.ai]
Conclusion investment case
Let's now summarize the full investment case for you.
HEICO is one of the best compounding businesses in the aerospace industry.
The company designs and manufactures replacement aircraft parts and specialized electronic components.
It operates a capital-light business with predictable recurring demand.
Every time an aircraft flies, parts wear out and eventually need to be replaced.
This makes HEICO a tollbooth on the global aviation industry.
The business benefits from:
FAA-approved products that are difficult to replicate
A decades-long reputation for quality and reliability
High switching costs and long customer relationships
HEICO also has an excellent acquisition strategy.
They have successfully completed over 112 acquisitions while allowing each business to operate independently.
Today, their product portfolio has grown to over 20,000 approved replacement parts.
While the opportunities are attractive, there are also risks.
Airlines may be restricted from using PMA parts under certain contracts
Existing players continue to defend their aftermarket business
Aviation demand can weaken during recessions or global disruptions
Despite these challenges, management continues to invest for the long term by expanding its product portfolio and acquiring high-quality businesses.
Onepager
Here are the basics of HEICO (click on the picture to expand):
[Table image — HEICO ONEPAGER, data provided by Fiscal.ai. Transcribed: Description: "Heico is a top American aviation, aerospace, and electronics company founded in 1957. They design and manufacture advanced aerospace components, defense systems, and industrial products. Led by CEO Laurans Mendelson, Heico drives growth through strategic acquisitions. As a serial acquirer, it strengthens its expertise by adding niche businesses that share its focus on quality. Known for reliability, Heico has become a trusted name in aerospace. Its commitment to excellence ensures long-term success and industry leadership. The Mendelson family has transformed Heico into one of the best compounders of the past decade." Revenue split — Flight Support Group: 68.8% · Electronics Technologies Group: 31.2% Geographical split (% of revenue) — United States: 61.9% · Others: 38.1% Management — Eric A. Mendelson and Victor H. Mendelson are the Co-CEOs and Co-Chairmen of HEICO. The Mendelson family and insiders continue to own roughly 20% of the company. Moat — Airlines favor Heico for offering parts that are cheaper than the originals yet equally reliable. Strict FAA rules create a high barrier to entry. Main strengths — Serial acquirer model · Interesting end market Main risks — High dependence on the Mendelsons · M&A integration and supervision Main peers — TransDigm Group Ownership culture — CEO tenure 1.2 yrs · Insider ownership 20.0% · Owner-operator stock? Yes · CAGR since IPO 21.9% Capital intensity — CAPEX/Sales 1.4% · CAPEX/Sales (5 yr) 2.0% · CAPEX/Op. CF 7.1% · CAPEX/Op. CF (5 yr) 8.0% Balance sheet — Interest coverage 9.0x · Net debt/FCF 2.7x · Goodwill/Assets 44.4% Capital allocation — ROIC 11.2% · Avg. ROIC (5 yr) 11.3% · ROE 16.6% · Avg. ROE (5 yr) 15.1% · Avg. FCF/Net income (5 yr) 110.7% Profitability — Gross margin 40.1% · Avg. gross margin (5 yr) 39.1% · Profit margin 17.3% · Avg. profit margin (5 yr) 16.8% · SBCs as % of net income 4.0% Outlook — Revenue growth (2 yr) 13.4% · EBITDA growth (2 yr) 15.2% · EPS growth (2 yr) 13.6% · EPS LT growth est. 13.6% Historical growth — Revenue growth (5 yr) 21.4% · Revenue growth (10 yr) 13.6% · Owner's earnings (5 yr) 20.5% · Owner's earnings (10 yr) 17.1% Valuation — Forward PE 57.3x · Avg. forward PE (5 yr) 54.9x · Avg. forward PE (10 yr) 50.3x · FCF yield 1.8% Share price evolution (USD): $359.67]
Quality Score
Every company gets a Quality Score based on 15 metrics.
Finally, the company gets a 'Total Quality Score' which is calculated by taking the sum of the score of all 15 metrics and dividing it by 15.
As you can see in the table below HEICO gets a Total Quality Score of 7.8/10.
[Table image — HEICO QUALITY SCORE (Owner-Operator), by Compounding Quality. Transcribed: Business model 9/10 — Heico makes replacement parts for planes; with 98 subsidiaries, Heico is a serial acquirer Capability management 9.5/10 — The Mendelson family owns 16.6% of Heico and have taken the lead in 1990; 400 different employees own more than $1 million worth of Heico stock Sustainable competitive advantage 8.5/10 — Heico is the lowest-cost producer; tough regulations create a high barrier to entry Attractiveness of the industry 8/10 — The world isn't going to be a much safer place; year after year, people travel more Main risks 5/10 — Too dependant on the Mendelsons; a failure of a part in a plane could cause massive reputation damage Balance sheet 7/10 — Heico has a healthy balance sheet; interest coverage 5.2x, net debt/FCF 3.7x, goodwill/assets 44.4% Capital intensity 9/10 — Heico is a capital light business; CAPEX/sales 1.5%, CAPEX/cash from operations 9.34% Capital allocation 9/10 — The capital allocation metrics of Heico are good; ROCE 13.8%, return on tangible assets 18.7% Profitability 8/10 — Heico is very profitable; gross margin 38.9%, net profit margin 12.6%, FCF/net income 116.7% Usage of Stock-Based Compensation (SBCs) 7/10 — SBCs are a cost for shareholders and should be treated accordingly; average SBCs as a % of net income past 5 years: 7.0% Historical growth 9/10 — Heico grew very attractively in the past; revenue and EPS CAGR past 10 years: 12.9% and 14.2% Outlook 9/10 — Serial acquirers as Heico have long runways; expected long-term EPS growth: 17.9% Valuation 2/10 — The company trades at a forward PE of 53.7x (10-year average: 46.9x); reverse DCF: Heico should grow its FCF by 21.4% per year Evolution owner's earnings 8/10 — Stock prices follow the Owner's Earnings of a company; CAGR owner's earnings past 5 and 10 years: 14.3% and 8.7% Historical value creation 10/10 — Heico managed to outperform the S&P 500 by a wide margin in the past; CAGR since IPO (1986): +20.6% TOTAL SCORE: 7.8/10]
Full Investment Case
You can download the full investment case here:
Investment case HEICO
Are we buying?
So, are we buying HEICO? Is it worth a spot in Our Portfolio?
No. We are not buying HEICO at this point in time for Our Portfolio.
The main reason?
Valuation looks stretched: HEICO's quality is well recognized, so the stock rarely trades at a discount. This leaves little margin of safety.
The company currently trades at a Forward PE of 57 (!) x.
For now, we will keep following up on HEICO very closely.
Slow Compounding
This investment case was made by Alexander.
He was very kind to share this investment case with us.
You can check out his work here:
Slow Compounding
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Book
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Used sources
Interactive Brokers: Portfolio data and executing all transactions
Fiscal.ai: Financial data
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