- Precision's parts are critical components in every commercial airplane.
- More Precision components on next-generation planes will provide a multi-year tailwind.
- The company's efficiency-obsessed CEO has a track record of creating shareholder value.
Key Company Data
- Headquarters: Portland, Ore.
- Website: www.precast.com
- Market Cap: $26.3 billion
- Annual Revenue: $10 billion
- Annual Operating Income: $2.6 billion
- Cash/Debt: $474 million / $4.6 billion
- Dividend Yield: 0.1%
- Recent Price: $193.20
- Intrinsic Value: $235
- Risk Rating: Medium
- Buy Around: $198
Data as of 7/13/15
Airplane stuff is my COC (circle of competence). Being a pilot and ex-airforce, I have a very clear view how this industry works. There's no margin for error at 30,000 feet. Airplane components must be able to withstand extreme temperatures and punishing pressure — the slightest defect could mean disaster. That's why jet engine and airframe manufacturers depend on PCP. Precision's parts can be found in all current-generation commercial planes, and the company will have an even bigger presence in the next-generation platforms currently in development. They supply to General Electric, Rolls Royce, Airbus, Boeing etc... Pretty big moat there. Balance sheet looks pretty healthy too.
Price is rather capital intensive, however alternative trades is to buy an 2016 CALL option, delta around 0.75 and above hold it there. Again, as it's a leveraged trade, only risk maximum of 2% of your capital.