Ducommun 's growth and profit margin potential make the stock hard to ignore, according to Goldman Sachs. Analysts led by Noah Poponak upgraded the small cap aerospace stock to buy from neutral. Poponak's $80 price target — a high on Wall Street by LSEG's count — implies shares can jump more than 30% from Monday's close.
The analyst said Ducommun has a strong outlook for growth across its business, especially with its exposure to original equipment manufacturers. While its defense business has recently been challenged, Poponak said orders and easier comparable figures can help. "We expect DCO to benefit from its exposure to aerospace original equipment as the OEMs ramp up production significantly to meet strong demand," the analyst wrote to clients in a Tuesday note.
"DCO is growing its aerospace aftermarket, where fundamentals are strong." Poponak also pointed to Ducommun's plans for expanding operating margins over the medium term, with the company already showing progress. He said the company's profit margin and upside to return on capital can continue improving due to benefits from its volume, mix, price and cost features.
Goldman called the company an "acquisition compounder opportunity" within the aerospace and defense sector ever since current management took the helm in 2017. Poponak also highlighted Ducommun's current valuation at 7.8 times 2025 enterprise value-to-EBITDA, below competitors Triumph Group (8.
4x) and Hexcel (13.5x), and other high quality aftermarket suppliers that sell for between 17 and 20 times. Goldman was the lead joint bookrunner for Ducommun's last sale of stock in May 2023.
Ducommun shares rose more than 8% in early trading on Tuesday. The stock has now climbed more than 26% in 2024..
