Is Ducommun (DCO) Still Attractive After Its Strong Multi Year Share Price Rally

• If you are wondering whether Ducommun's current share price still offers value after a strong run, this article will walk through what the numbers are really saying.
• The stock last closed at US$114.24, with returns of 6.0% over 7 days, 24.6% over 30 days, 18.0% year to date, 66.7% over 1 year, 111.1% over 3 years and 101.1% over 5 years. This performance has naturally raised questions about how much upside or risk may now be priced in.
• Recent news coverage around Ducommun has focused on its position in the capital goods sector and investor interest in companies tied to aerospace and industrial demand. This helps explain why the shares have attracted attention alongside these returns. This backdrop is important context as we assess whether the current price reflects the business fundamentals or recent enthusiasm.
• On our valuation checks, Ducommun currently scores 4 out of 6. This suggests some metrics point to the shares looking undervalued while others are more balanced. We will look at several common valuation approaches next before finishing with a more holistic way to think about the company’s value.

Ducommun delivered 66.7% returns over the last year. See how this stacks up to the rest of the Aerospace & Defense industry.

Approach 1: Ducommun Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes estimates of the cash a company could generate in the future and discounts those amounts back to what they might be worth to you in today's dollars.

For Ducommun, the model used here is a 2 Stage Free Cash Flow to Equity approach. The company generated trailing twelve month free cash flow of about $42.4 million. Analysts have provided forecasts out to 2027, with free cash flow for that year projected at $84.5 million, and further cash flows out to 2035 are extrapolated from those analyst inputs by Simply Wall St.

When all those projected cash flows are discounted back and combined, the model arrives at an estimated intrinsic value of about $155.38 per share. Compared with the recent share price of $114.24, this implies an intrinsic discount of roughly 26.5%, which indicates the shares screen as undervalued on this DCF view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Ducommun is undervalued by 26.5%. Track this in your watchlist or portfolio, or discover 863 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Ducommun.

Approach 2: Ducommun Price vs Sales

Price based multiples are often useful for companies that are generating meaningful revenue, because they let you compare what investors are paying for each dollar of sales across similar businesses. The “right” P/S ratio typically reflects what the market thinks about a company’s growth potential and risk, with higher growth or lower perceived risk often lining up with higher multiples.

For Ducommun, the preferred multiple is P/S. The shares currently trade on a P/S of 2.12x, compared with the Aerospace & Defense industry average of 3.85x and a peer group average of 5.81x. Simply Wall St’s Fair Ratio for Ducommun is 1.08x. This Fair Ratio is a proprietary estimate of what a reasonable P/S might be, given factors such as earnings growth, profit margins, industry, market cap and company specific risks.

That makes the Fair Ratio more tailored than a simple comparison with peers or the sector. A basic peer or sector comparison can overlook differences in quality or risk. With Ducommun’s actual P/S of 2.12x sitting above the Fair Ratio of 1.08x, the shares screen as trading richer than this customised benchmark.

Result: OVERVALUED

P/S ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1445 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Ducommun Narrative

Earlier we mentioned that there is an even better way to think about value, and on Simply Wall St that starts with Narratives, where you and other investors set out a clear story for Ducommun, link that story to specific forecasts for revenue, earnings and margins, and end up with a Fair Value that you can compare to today’s price on the Community page that millions of investors use.

A Narrative is simply your view of how Ducommun’s business is likely to play out, written in plain language but grounded in numbers, and the platform connects that story to a full financial model so you can see what your assumptions about factors such as defense demand, commercial aerospace recovery, execution risks or accounting concerns imply for future earnings and an estimated fair value.

Because Narratives update automatically when new information like earnings or news arrives, you can quickly see how the Fair Value you or others have set stacks up against the current share price. This can help you judge how Ducommun looks relative to your own strategy, for example when a more optimistic Narrative uses the higher US$125 price target, while a more cautious one anchors closer to the lower analyst targets and focuses on risks around accounting quality and sector reliance.

Do you think there's more to the story for Ducommun? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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