HEICO Corp. Popped: What You Need to Know (HEI)

HEICO Corp. Popped: What You Need to Know

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of aerospace supplier HEICO Corp. (NYSE: HEI ) -- motto: "No, not the company with the talking lizard" -- popped 11% this morning.

So what: Second-quarter earnings were the catalyst, with profits up 34% year over year, exceeding Wall Street estimates and leading to a bump in guidance for the year.

Now what: Good news? No doubt. And surprising news, too. Traders had placed short bets against more than 30% of the company's float going into earnings. I suspect there's quite a bit of short covering going on right now, and that this is contributing to the shares' surge to an all-time high.

Once the covering ends, HEICO bears will doubtless tell us that at 35 times earnings, the stock's an even safer short-bet now. Don't believe it. According to its cash flow statement, HEICO generated more than $104 million in free cash flow over the past 12 months -- 61% better than reported as "net income" under GAAP. While the resulting price-to-free cash flow ratio of 22 looks a little pricey relative to consensus growth prospects, this stock's not nearly as expensive as it looks. And not nearly as safe a short as its critics believe.

Bears vs. bulls -- who will carry the day? Add HEICO to your watchlist and find out.

The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

Enter your email address below to find out what made Jobs so enraged!

Fool contributor Rich Smith holds no position in any company mentioned. Click here to see his holdings and a short bio. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.