TransDigm Group, Inc. (TDG, Financial), the aircraft parts manufacturer (and the largest position in the Fund), reported that its crucial commercial aftermarket division grew revenues 13% on an organic basis in the quarter and its EBIDTA grew 28%. This was a significant improvement from the prior quarter and validated the company’s stance that the previous quarter’s results were an anomaly and that the company should be able to revert to its historic high single-digits organic revenue growth. TransDigm also announced that they repurchased $100 million of stock when the price was low and completed a significant $1 billion acquisition in the quarter. This is in keeping with other purchases of like businesses whose profitability has subsequently been considerably improved under TransDigm management.
TransDigm recently held an analyst day that highlighted the incredible success the company has had and the cash flow machine they have built. By the way, equity value of the company has compounded at 33% for the 24 years since founding and the enterprise value of the company has grown from $50 million to $23 billion!
From Baron Funds' Small Cap Fund second quarter 2016 shareholder letter.
