Heico (NYSE:HEI.A) vs. Hexcel (NYSE:HXL) Critical Analysis

Heico (NYSE:HEI.A) and Hexcel (NYSE:HXL) are both aerospace companies, but which is the superior investment? We will compare the two companies based on the strength of their earnings, valuation, dividends, risk, institutional ownership, analyst recommendations and profitability.

Profitability

This table compares Heico and Hexcel’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Heico	14.96%	16.29%	8.00%
Hexcel	4.69%	9.76%	5.40%

Dividends

Heico pays an annual dividend of $0.24 per share and has a dividend yield of 0.1%. Hexcel pays an annual dividend of $0.68 per share and has a dividend yield of 1.1%. Heico pays out 5.3% of its earnings in the form of a dividend. Hexcel pays out 63.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Hexcel has increased its dividend for 3 consecutive years. Hexcel is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent ratings and target prices for Heico and Hexcel, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Heico	0	1	0	0	2.00
Hexcel	1	7	2	0	2.10

Hexcel has a consensus price target of $63.33, indicating a potential upside of 0.20%. Given Hexcel’s stronger consensus rating and higher probable upside, analysts clearly believe Hexcel is more favorable than Heico.

Earnings and Valuation

This table compares Heico and Hexcel”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Heico	$3.86 billion	8.81	$514.11 million	$4.57	53.46
Hexcel	$1.90 billion	2.64	$132.10 million	$1.08	58.53

Heico has higher revenue and earnings than Hexcel. Heico is trading at a lower price-to-earnings ratio than Hexcel, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

59.0% of Heico shares are held by institutional investors. Comparatively, 95.5% of Hexcel shares are held by institutional investors. 9.8% of Heico shares are held by company insiders. Comparatively, 1.4% of Hexcel shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Volatility & Risk

Heico has a beta of 1.14, suggesting that its stock price is 14% more volatile than the S&P 500. Comparatively, Hexcel has a beta of 1.36, suggesting that its stock price is 36% more volatile than the S&P 500.

Summary

Heico beats Hexcel on 9 of the 17 factors compared between the two stocks.

About Heico

HEICO Corporation, through its subsidiaries, designs, manufactures, and sells aerospace, defense, and electronic related products and services in the United States and internationally. The company's Flight Support Group segment provides jet engine and aircraft component replacement parts; thermal insulation blankets and parts; renewable/reusable insulation systems; and specialty components. This segment also distributes hydraulic, pneumatic, structural, interconnect, mechanical, and electro-mechanical components for the commercial, regional, and general aviation markets; and offers repair and overhaul services for jet engine and aircraft component parts, avionics, instruments, composites, and flight surfaces of commercial aircraft, as well as for avionics and navigation systems, subcomponents, and other instruments utilized on military aircraft. Its Electronic Technologies Group segment provides electro-optical infrared simulation and test equipment; electro-optical laser products; electro-optical, microwave, and other power equipment; electromagnetic and radio interference shielding and suppression filters; high-speed interface products; high voltage interconnection devices; high voltage advanced power electronics; power conversion products; and underwater locator beacons and emergency locator transmission beacons. This segment also offers traveling wave tube amplifiers and microwave power modules; three-dimensional microelectronic and stacked memory products; harsh environment connectivity products and custom molded cable assemblies; radio frequency and microwave amplifiers, transmitters, and receivers; communications and electronic intercept receivers and tuners; self-sealing auxiliary fuel systems; active antenna systems; and nuclear radiation detectors. The company serves customers primarily in the aviation, defense, space, medical, telecommunications, and electronics industries. HEICO Corporation was founded in 1957 and is headquartered in Hollywood, Florida.

About Hexcel

Hexcel Corporation develops, manufactures, and markets carbon fibers, structural reinforcements, honeycomb structures, resins, and composite materials and parts for use in commercial aerospace, space and defense, and industrial applications. It operates through two segments, Composite Materials and Engineered Products. The Composite Materials segment manufactures and markets fabrics, multi-axials, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, structural adhesives, molding compounds, tooling materials, polyurethane systems, and laminates that are used in military and commercial aircraft, wind turbine blades, recreational products, and other industrial applications, as well as in automotive, marine, and rail transportation. The Engineered Products segment manufactures and markets aircraft structures and finished aircraft components, including wing to body fairings, wing panels, flight deck panels, door liners, rotorcraft blades, spars, and tip caps; and aircraft structural sub-components and semi-finished components used in rotorcraft blades, engine nacelles, and aircraft surfaces, such as flaps, wings, elevators, and fairings; and RF interference control products for military and aerospace applications. This segment also provides interference control materials, structural composites, and services; dielectric absorber foams; magnetic absorbers; and thermoplastics for commercial and defense applications. The company sells its products directly through its managers, product managers, and sales personnel, as well as through independent distributors in the Americas, Europe, the Asia Pacific, India, and Africa. Hexcel Corporation was founded in 1946 and is headquartered in Stamford, Connecticut.