What happened

Aerospace parts supplier TransDigm Group (TDG 0.58%) beat estimates in the most recent quarter and forecast strong profitability heading into its fiscal 2023. Investors applauded the results, sending TransDigm shares up as much as 11% on Thursday.

So what

TransDigm has always been a gravity-defying business. Though aerospace is traditionally seen as a slower-growth, income-focused business, and parts companies in particular have a mixed record of profitability, TransDigm is one of the top performers in the industry. Over the past decade the shares are up 371%, nearly 200 percentage points better than the S&P 500, despite its exposure to airlines and other sectors hit hard by the pandemic.

The company's latest quarter was a reminder of the strength of the business. TransDigm earned $5.50 per share in its fiscal fourth quarter, easily topping analyst expectations for $5.20 per share in earnings, on revenue of $1.51 billion that matched expectations.

TransDigm beat because of its software-like margins, reporting a 49.8% earnings before interest, taxes, depreciation, and amortization (EBITDA) margin in the quarter. Commercial aftermarket, or spare part, sales led the way with year-over-year organic growth of 36%, with business supplying aircraft manufacturers growing by 29%.

The company said that bookings of future business outpaced shipments in the quarter, a positive sign of continued demand ahead.

Now what

TransDigm was founded in 1993 as a holding company of largely autonomous businesses, and has used acquisitions to build a portfolio of high-performing units. The company's focus on manufacturing parts that are either patent-protected or not needed in bulk (so therefore hard to commoditize) has paid off through the years in the form of those impressive margins, and the momentum shows no signs of fading.

The company said it expects fiscal 2023 sales to come in between $5.99 billion and $6.19 billion, well within Wall Street's $6.07 billion estimate, and expects EBITDA margin to improve to about 50% in the new fiscal year. Though the company has just $3 billion in cash and $19.89 billion in debt it has no major maturities until 2024, and about 85% of debt is borrowed at fixed rates during a period of historically low rates.

For more than a decade TransDigm has been an off-the-radar gem of an investment. Based on the most recent results, investors don't expect that to change anytime soon.