What happened

Shares of Heico Corporation (NYSE:HEI) climbed 10.92% in February, according to data provided by S&P Global Market Intelligence, after the company reported another quarter of outperformance and management indicated the formula that has guided the business to years of market-beating returns remains intact.

So what

Heico reported fiscal first-quarter earnings of $0.58 per share, $0.11 ahead of consensus, on revenue of $466.15 million, up 15.3% year over year and comfortably above analyst expectations of $451 million. About half of its business comes from the commercial aviation sector, with space and defense comprising about 35% of sales and non-aerospace industrial markets making up the rest.

Check out the latest earnings call transcript for Heico.

Two planes flying overhead in opposite directions.

Image source: Getty Images.

The company, which is now up 18% year to date, has a long history of outperforming. Since current management took over in 1990, Heico has delivered compounded annual sales growth of 16% and net income growth of 19%. That's come from strong operations and from being a prolific acquirer, having closed more than 70 deals to add a range of certified replacement parts for commercial and defense platforms.

On a post-earnings call, company CEO Larry Mendelson said he expects Heico to deliver full fiscal-year sales growth of between 9% and 11% and net income growth of 11% and 13%. And he said the company remains on the hunt for acquisitions:

Heico Corporation maintains substantial financial liquidity, which allows us to execute our robust acquisition strategy while aggressively growing our core businesses. We currently have a low level of debt relative to our cash flows, and we believe we're uniquely positioned to swiftly act upon acquisition opportunities that expand our global capabilities and cement our leadership positions in the markets we choose to serve.

Now what

Heico is similar to TransDigm Group, another aerospace component rollup that similarly focuses on acquiring firms with dominant positions or specialized technologies that allow for few competitors. But Heico, despite generating trailing-12-month EBIT margins of 21.4%, or about half of TransDigm's 43.8% EBIT margin, is valued at 45 times earnings compared with TransDigm's 30 times multiple.

I like Heico's business and see no reason to believe the well-oiled machine will falter, but given its valuation, there is reason to rush in at these levels.