Even during a down period for the markets, Ducommun has gone against the grain, climbing to $70.38. Its shares have yielded a 6.3% return over the last six months, beating the S&P 500 by 8.6%. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in Ducommun, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think Ducommun Will Underperform?
We’re happy investors have made money, but we're sitting this one out for now. Here are three reasons why there are better opportunities than DCO and a stock we'd rather own.
1. Weak Backlog Growth Points to Soft Demand
Investors interested in Aerospace companies should track backlog in addition to reported revenue. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into Ducommun’s future revenue streams.
Ducommun’s backlog came in at $1.05 billion in the latest quarter, and over the last two years, its year-on-year growth averaged 4.8%. This performance was underwhelming and suggests that increasing competition is causing challenges in winning new orders. 
2. Mediocre Free Cash Flow Margin Limits Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Ducommun has shown poor cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.1%, lousy for an industrials business.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Ducommun historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 4.5%, lower than the typical cost of capital (how much it costs to raise money) for industrials companies.
Final Judgment
We cheer for all companies making their customers lives easier, but in the case of Ducommun, we’ll be cheering from the sidelines. With its shares beating the market recently, the stock trades at 18.4× forward P/E (or $70.38 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. Let us point you toward one of our top digital advertising picks.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.