TATT

We rate TAT TECHNOLOGIES LTD (TATT) as a Buy with a composite score of 70.1/100 at a current price of $55.00. The stock scores above average across the majority of our six quantitative factors and ranks #89 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in value (79th percentile) and quality (78th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (35th percentile) and stability (61th percentile) tempers our overall conviction. We assign a Narrow Moat rating (65/100), Low uncertainty, and Exemplary capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

TAT TECHNOLOGIES LTD holds a lower-quartile position (#45 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 70.1/100 places it at rank #89 in our full 7,333-stock universe. At $259M in market capitalization, TAT TECHNOLOGIES LTD is a small-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

The near-term outlook is constructive, with revenue growing at 34% and momentum in the 77th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 35th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 22% (-20.8pp vs sector) narrow to operating margins of 8% (+6.9pp vs sector) and net margins of 7.3%, yielding a gross-to-net conversion rate of 34%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $55.00, TAT TECHNOLOGIES LTD appears undervalued relative to its fundamentals. Our value factor score of 79/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 49.8x (a 124% premium to the sector median of 22.3x), EV/EBITDA of 9.9x (near the sector median), P/B of 6.1x, P/S of 1.1x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Low uncertainty rating to TAT TECHNOLOGIES LTD. The company exhibits strong financial stability with a beta of 0.89, conservative leverage (16% D/E), and a stability factor in the 61th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: elevated valuation multiple (P/E 49.8x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 61th percentile and quality factor at the 78th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (16% D/E) limits balance sheet risk; above-average stability (61th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate TAT TECHNOLOGIES LTD's capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 39.9%, disciplined leverage (16% D/E). Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — TAT TECHNOLOGIES LTD meets this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. We note that the combination of 27.3% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, TAT TECHNOLOGIES LTD receives a Buy rating with a composite score of 70.1/100 (rank #89 of 7,333). Our quantitative framework assigns a Narrow Moat (65/100, trend: stable), Low uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 66/100.

Our analysis supports a constructive view on TAT TECHNOLOGIES LTD. The combination of identifiable competitive advantages, low uncertainty, and exemplary capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.