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Ducommun Incorporated A Financial Analysis

972 words - 4 pages

DUCOMMUN INCORPORATED - A FINANCIAL ANALYSIS
Ana Miramontes
Keller Graduate School of Management
Securities Analysis
FIN560
Professor Kasthuri Henry
June 15, 2013

DUCOMMUN INCORPORATED - A FINANCIAL ANALYSIS
Charles Ducommun settled in California during the Gold Rush, he never would have imagined the impact this move would make his future and the future of investors in the stock market. According to Ducommun Incorporated’s website, Ducommun began operations in 1849 as small hardware store in Los Angeles, California. The company has since then evolved into a $600 million dollar company (Ducommun Incorporated, n.d.). In the early years of the aerospace industry, Ducommun ...view middle of the document...

7). Ducommun Incorporated recently completed its own acquisition. In June of 2011 it acquired LaBarge, Inc. LaBarge’s acquisition strategically positioned Ducommun as a strong player in the global electronic manufacturing services market. As a niche player, Ducommun will retain the ability to compete effectively and differentiate itself through high-mix, low volume business and industry expertise serving the medical device, natural resource and other non-aerospace and defense markets. Due to the growing and expanding nature of this new business model and due to many uncertainties with the federal budget, Ducommun Incorporated elected to stop paying dividends in January of 2011 (Ducommun Incorporated, n.d.). The cash retained by the company has given it the ability to make acquisitions and to offer financial protection during these uncertain and difficult financial times.
During fiscal year 2011 Ducommun reported a net loss of $47.5 million. This was attributable in part to a goodwill impairment charge of $54 million. The acquisition of LaBarge and the company’s strategic focus on efficient operations lead to a return to profitability and a positive return on equity. Although the return on equity for Ducommun has rebounded at 7.7% it is still significantly lower than its peers. Ducommun’s sampled peers have been able to generate an ROE ranging from 13% to almost 21%. The industry average ROE for the Aerospace/Defense industry with a sampling of 66 firms, including the sampled population, is significantly higher than Ducommun and its sampled peers at 24.03% as reported by Damodaran Online from New York University (Damodaran Online website, 2013).
While ROE is turned around for Ducommun we can see the negative effect of the interest burden, tax efficiency and the pre-interest pretax margin 2011 when the company underwent a major change to their capital structure. Ducommun has managed to pay down their long-term debt in the amount of $26.5 million in 2012 and plans to pay another $30 million in 2013 which will continue the...

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