-$3.51
$24.78
bear -$3.51
base $11.89
bull $24.78
margin of safety $5.95
market price* $61.53
Astronics (East Aurora, New York) supplies in-seat power, lighting, avionics and other electronics to aircraft makers and airlines (Aerospace segment, $600.8 million of backlog at year-end 2025) and builds automated test equipment for aerospace and defense customers (Test Systems, $73.7 million of backlog). About 60% of 2025 sales were in the United States, and Boeing was 10.4% of sales. WHAT CHANGED SINCE OUR LAST ANALYSIS. Our earlier estimates (roughly $7, $17 and $42 per share for the low, middle and high cases) used higher required returns and a perpetual growth rate, and did not deduct the company's borrowings. We now value the operating business at a flat 6%, give credit only for growth that is already secured or proven, and then subtract what the company owes. Debt costs shareholders about $9 per share, which is the main reason the estimates are lower, even though the evidence on earning power has improved: first-half 2026 revenue rose 19.5% to $490.6 million, operating income was $67.7 million against $17.9 million a year earlier, and gross margin has held near 33% for three straight quarters (33.3% in the fourth quarter of 2025, 32.6% in the first quarter of 2026 and 33.4% in the second, versus 30.0% for 2025 as a whole). Backlog reached $780.6 million at July 4, 2026, up from $674.5 million at year-end 2025 and $599.2 million a year before that. HOW WE MEASURE EARNINGS. We start with operating cash flow, remove swings in receivables, inventory, payables and similar working-capital items, subtract stock compensation as a real cost, subtract only the upkeep share of capital spending, and add back cash interest so the business is valued before its lenders. Business cash flow per share on that basis was $1.81 (2016), $1.46, $2.32 (2018), $0.36, $0.76, -$0.26, -$0.37 (2022), $0.53, $1.23 (2024) and $2.13 (2025). The ten-year median is about $1.00 per share (roughly $36 million a year); it spans a full aerospace cycle, including the pandemic collapse, so we treat it as the through-cycle level. Judgements that mattered: (1) working capital absorbed cash in each of 2022 to 2025 as sales grew (up to $36 million in 2023); we exclude that swing rather than treat it as permanent. (2) Litigation charges are counted when they are recorded, so later cash payments (such as the $21.6 million paid in 2025 on the UK patent case) are not deducted a second time. (3) 2025 capital spending of $31.7 million (versus $8.4 million in 2024) reflects facility expansion and upkeep deferred during the pandemic; we treated almost all of it ($30.5 million) as upkeep, partly offset by an $8.1 million landlord refund that sits in operating cash flow. (4) Debt-settlement charges ($32.6 million in 2025 and $10.1 million in 2024) are past financing costs, not operating costs. GROWTH CHECK. Business cash flow per share grew 73% in 2025 ($1.23 to $2.13). For 2026 our middle case assumes $2.55, up about 20%, which is below the trailing rate. The support is dated and in the filings: first-half 2026 results (quarterly report filed August 12, 2026) put the business on a pace of roughly $2.5 per share even after taxing it at a normal rate. Reported first-half taxes were only about 3% of pre-tax income and federal loss carry-forwards total just $41.8 million, so we do not assume that low tax rate continues; that adjustment removes about $23 million a year from the first-half pace. MIDDLE CASE: about $11.89 per share. Business cash flow of $2.55 per share in 2026, then $2.30 a year for 2027 to 2035 (the midpoint of 2025's audited $2.13 and the 2026 pace, because a few strong quarters do not yet make a cycle and aerospace has periodic downturns), then $1.00 a year for 2036 to 2045 (the ten-year median, the level the record shows persisting through a severe shock), then nothing, because we can name no driver beyond that. Returning to the $2.13 level already reached in 2025, and confirmed by four strong quarters since, is not treated as growth, and no growth is credited beyond it. The business is worth about $21.27 per share ($776 million). It owes about $342 million ($9.38 per share): $324.8 million of net borrowings at year-end 2025 (debt of $343.0 million, made up of a $225 million zero-coupon convertible note due January 2031, $33 million of 5.5% convertible notes due March 2030 and about $85 million drawn on its floating-rate revolver, less $18.2 million of cash) plus $17.6 million of German patent damages already recorded for indirect sales. The difference is $11.89 per share. We deduct the convertibles at face value; the zero-coupon note looks cheap, but its holders also own an option on the shares, so we take no credit for the low coupon. LOW CASE: about -$3.51 per share, a repeat of the pandemic-era collapse. Business cash flow of $2.00 per share in 2026 (first half banked, second half weaker), then $0.76 in 2027, -$0.26 in 2028, -$0.37 in 2029 and $0.53 in 2030, the same shape as 2020 to 2023 when the company actually reported $0.76, -$0.26, -$0.37 and $0.53. After that, $1.00 through 2035, then $0.50 a year for ten more years, then nothing. The business is worth about $7.65 per share ($279 million). It would owe about $407 million ($11.16 per share): the $342 million above, plus $43 million because the 2030 and 2031 convertibles would have to be refinanced at about 10% in a downturn rather than 6% (in the 2023 trough its cash interest bill more than doubled, to $17.7 million from $7.6 million), plus $22 million for an adverse outcome in the UK patent appeal, equal to what the company paid on that case in 2025. In this case the company owes about $128 million more than the business is worth, so shareholders would be left with nothing. HIGH CASE: about $24.78 per share. Business cash flow of $3.00 per share in 2026 (close to the first-half pace before extra tax), growing 3.5% a year through 2035 (the company's demonstrated ten-year sales growth, from $633 million in 2016 to $862 million in 2025, supported by the facility expansion already under way and record backlog), then $2.13 a year for 2036 to 2045, then nothing. The business is worth about $34.23 per share ($1,250 million). It owes about $342 million; because the value per share exceeds the $22.89 conversion price of the 2030 notes, we treat those $33 million of notes as converting into about 1.4 million shares. The result is $24.78 per share. WHAT WE LEFT OUT. Higher Boeing and Airbus production rates, share gains, gross margins above about 33%, acquisitions and any growth after 2035 are not credited in any case, because none is secured or demonstrated over a full cycle. HOW WE TRIED TO BREAK THE MIDDLE CASE. Two assumptions carry it. First, whether the roughly 33% gross margin is a one-off: it has now held for three consecutive quarters, so we count the earnings it produces, but we do not extrapolate it further. Second, taxes: the low first-half tax rate cannot last with only $41.8 million of federal losses to use, so we tax the 2026 pace normally. WHAT WE COULD NOT SETTLE. The quarterly reports show share counts (43.0 million basic and 46.5 million diluted in the second quarter of 2026) that we could not reconcile with the 35.7 million shares outstanding on February 19, 2026, so we used the annual diluted count of 36.5 million. We could not confirm the outcome of the March 2026 UK Court of Appeal hearing; the company says further amounts could be substantial. A French retrial on the validity of the patent is set for October 28, 2026, with no ruling expected before early 2027 and no liability recorded, and the German appeals on indirect damages are not expected to finish before the end of 2026. WHAT WOULD MAKE THIS WRONG. A new aerospace downturn, loss of business at Boeing (10.4% of sales), the gross margin reverting toward 2025's 30%, tariffs, larger litigation payments, or trouble refinancing the $225 million 2031 note. MARGIN-OF-SAFETY PRICE: $5.95, about half of the middle-case value, reflecting a cyclical, leveraged business with open litigation and a low case that is below zero.