Investment Thesis
DUCOMMUN exhibits solid financial stability with excellent liquidity (3.67x current ratio) and manageable leverage (0.44x debt/equity), but fundamentally underperforms through poor capital efficiency with ROE of just 1.5% and ROA of 0.8%. The company generates modest operating cash flow ($11.2M FCF) and operates in the stable aerospace sector, though thin 4.7% net margins and low free cash flow generation relative to its $1.2B asset base indicate a mature business generating inadequate returns on shareholder capital.
Strengths
- Excellent liquidity position with 3.67x current ratio and 2.59x quick ratio
- Moderate and manageable debt levels with 0.44x debt-to-equity ratio
- Positive operating cash flow and free cash flow generation in aerospace defense sector
- Financially stable with no imminent solvency concerns
Risks
- Severely depressed returns on equity (1.5%) and assets (0.8%) indicate poor capital efficiency
- Low net profit margin of 4.7% and operating margin of 7.5% suggest limited pricing power
- Modest free cash flow ($8.3M) relative to $1.2B asset base limits financial flexibility and growth investment
- Cash position of $39.1M is low relative to $297.6M long-term debt, reducing financial cushion
- Lack of year-over-year revenue and net income comparison prevents assessment of growth trajectory
Key Metrics to Watch
- Return on Equity trend - critical to assess if capital deployment improves
- Operating margin expansion - needed to justify current leverage levels
- Free cash flow generation and conversion to debt reduction - key to improving returns
- Revenue growth trajectory - essential for understanding business momentum without historical context
Financial Metrics
Revenue
209.0M
Net Income
9.9M
EPS (Diluted)
$0.64
Free Cash Flow
8.3M
Total Assets
1.2B
Cash
39.1M
Profitability Ratios
Gross Margin
26.9%
Operating Margin
7.5%
Net Margin
4.7%
ROE
1.5%
ROA
0.8%
FCF Margin
4.0%
Balance Sheet & Liquidity
Current Ratio
3.67x
Quick Ratio
2.59x
Debt/Equity
0.44x
Debt/Assets
43.5%
Interest Coverage
N/A
Long-term Debt
297.6M
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-13T06:52:58.096238 |
Data as of: 2026-04-04 |
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