First Pacific Advisors (Trades, Portfolio) increased its position in Esterline Technologies Corp. (ESL, Financial) on Sept. 16.
In Esterline, the firm purchased 220 shares for an average price of $74.96 per share. The transaction increased its stake by 0.01% to 3,690,774 shares.
Esterline designs, manufactures and markets highly engineered products for the aerospace and defense industry in the U.S. and Europe. Its three product segments are avionics and controls, sensors and systems and advanced materials. The company was established in 1906 and is headquartered in Bellevue, Washington. FPA purchased its initial stake in the company in the third quarter of 2015.
FPA was founded as Shareholders Management Company in Los Angeles in 1954. It became FPA in 1976. The firm manages around $29 billion across multiple strategies, including five equity and one fixed income. The firm is dedicated to value investing. Before investing in a company, the firm conducts thorough research to ensure the intrinsic value of the company exceeds what they pay, with a reasonable margin of safety.
The company has a market cap of $2.2 billion with an enterprise value of $2.8 billion. Its price-earnings (P/E) ratio is 41.9, and its forward P/E is 14.4. Its price-book (P/B) ratio is 1.4, and its price-sales (P/S) ratio is 1.2.
GuruFocus ranked the company’s financial strength 6 of 10. Its Piotroski F-Score of 6 indicates a healthy financial condition. Its Altman Z-Score is 2.6, placing it in the grey zone. Its Beneish M-Score of -2.5 implies the company is not a manipulator of its financial records. Esterline’s cash to debt ratio of 0.27 is below the industry median of 0.41.
GuruFocus ranked Esterline’s profitability and growth 6 of 10. It has an operating margin of 7.6% and a net margin of 2.9%. The company’s ROE of 3.4% ranks lower than 58% of other companies in the global aerospace and defense industry. Its ROA of 1.7% ranks lower than 53% of other companies in that industry.
FPA is the company’s largest shareholder. It holds 12.6% of Esterline’s shares, which is 2.3% of their total assets managed. Gurus invested in Esterline are Steven Romick (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio) and Barrow, Hanley, Mewhinney & Strauss.
Esterline is one of four aerospace and defense companies in FPA’s portfolio. The other three are United Technologies Corp. (UTX, Financial), KLX Inc. (KLXI, Financial) and Cubic Corp. (CUB, Financial).
The DCF Calculator gives the stock a fair value of $34.08; it was trading at $74.63 on Wednesday.
Disclosure: I do not own stock in any companies mentioned in the article.
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