L3Harris scores 58 for management and 71 for moat. The management score rests on a return on invested capital of 5.1% and a gross margin of 25.7% — figures that describe returns closer to the cost of the capital behind them. Debt sits at 0.57x equity. The solid moat and mixed management are not the same judgement, and the gap between them is where the argument about this business sits.
The valuation runs on assumptions chosen to understate rather than flatter. Growth is modelled at 3.7% a year, below the 4.0% actually measured over the last decade — the model caps growth rather than extrapolating a good run forwards. The exit multiple assumed is 8.0x. That produces an intrinsic value of $28.27, a 10-CAP price of $156.89 and a payback time price of $148.61, with the value zone set at the highest of the three, $156.89. Today's price of $238.40 is 52% above it.
The price is above the value zone and the business scores 71 for moat and 58 for management. Neither test argues for paying up here.
| Price | $238.40 |
| Market cap | $44.4B |
| P/E ratio | 24.1x |
| Return on invested capital | 5.1% |
| Gross margin | 25.7% |
| Debt to equity | 0.57x |
| Free cash flow yield | 4.7% |
| Growth rate used | 3.7% |
| Growth rate measured | 4.0% |
| Exit multiple assumed | 8.0x |
| Company | Moat | Buy price |
| Heico Corp-Class A (HEI-A) | 100 | $117.84 |
| HEICO Corporation (HEI) | 100 | $117.84 |
| Honeywell Aerospace Inc (HONA) | 13 | $32.40 |
| Axon Enterprise (AXON) | 61 | $36.18 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of L3Harris rather than accepting ours.