Loar's Record Results and Raised Guidance Mask Underlying Valuation Risks

What happened

Loar Holdings Inc. reported record Q4 and full-year 2025 results, with increases in net sales, adjusted EBITDA, and margins. The company also upwardly revised its full-year 2026 outlook, signaling management's confidence in continued growth. However, DeepValue analysis reveals that prior guidance implied only ~11% organic growth for 2026, underscoring a heavy reliance on acquisitions like LMB for expansion. Despite positive headlines, Loar trades at elevated multiples of 104x trailing EPS and 55x EV/EBITDA, with GAAP earnings pressured by high amortization and stock-based compensation. This disconnect suggests the market may be overestimating sustainable growth, risking multiple compression if execution falters.

Implication

The upward revision to 2026 guidance may provide short-term momentum but fails to address core concerns about Loar's high valuation multiples. With a P/E ratio over 100x, the stock is priced for flawless execution, leaving no margin for error. Integration risks from recent acquisitions like LMB could impair earnings if targets are missed, while adjusted EBITDA margins mask thinner GAAP profitability due to non-cash charges. Consequently, the DeepValue 'POTENTIAL SELL' recommendation remains valid, advising position reduction or avoidance until valuation resets to more reasonable levels.

Thesis delta

The news of record results and raised guidance reinforces Loar's strong operational performance but does not alter the investment thesis. Core concerns—excessive valuation, slowing organic growth, and acquisition risks—persist unchanged, warranting no material shift in the 'POTENTIAL SELL' rating.