Loar Pulls Back 25% but Valuation Remains Rich

What happened

Loar Holdings' share price has fallen 25% from its highs, despite the company raising its 2026 outlook and posting strong Q1 growth. The Seeking Alpha article notes that while adjusted EBITDA margins improved to 40.5%, the company's aggressive M&A strategy is funded by expensive debt near 10% interest, and realistic earnings multiples remain around 50x. The DeepValue master report had already flagged the stock as a Potential Sell at $70.47, citing decelerating organic growth, rising amortization, and a crowded shareholder base. The pullback partially addresses valuation overhang but still leaves the stock trading at a premium that embeds perfection. Investors should remain cautious until either the price falls toward the $55 attractive entry or guidance becomes more conservative.

Implication

Long-term investors should wait for a clearer margin of safety. The base case from the DeepValue report implies $72 value, still above current $70.47, but the bear case of $50 suggests downside risk remains if organic growth slows or integration falters. Until LOAR demonstrates it can sustain high-teens organic growth and maintain margins without significant leverage, position sizes should be limited.

Thesis delta

The thesis remains cautious; the 25% pullback reduces some valuation overhang but does not alter the fundamental risk/reward. The DeepValue report's Potential Sell rating is unchanged, with attractive entry at $55 still below current levels. The new article reinforces concerns about expensive debt and reliance on M&A for growth, confirming that the market's 'priced for perfection' narrative is correct.