IEH Corp (IEHC) stock intrinsic value fair value estimate & owner earnings analysis

IEH Corporation is a family-managed connector maker with plants in Brooklyn, New York and Allentown, Pennsylvania. It believes it is the only independent U.S. producer of Hyperboloid printed-circuit-board connectors, a rugged contact design used where a failed connection is not acceptable. IEH appears on the Defense Logistics Agency's qualified products list for MIL-DTL-55302. In fiscal 2026 (year ended March 31, 2026) revenue was $29.4 million: 63% defense, 25% commercial aerospace, 8% space and 4% other. Two customers took 34% of sales, and the largest took 23.5%. How we measure earnings: we start from operating cash flow, strip out swings in working capital, charge stock compensation as a real cost, and deduct the capital spending needed to keep the plants running. We treat inventory write-downs as a real cost, because obsolete parts were bought with cash. Rent on the leased plants stays in as an operating cost. On that basis the last ten fiscal years ran: 2017 $1.4M, 2018 $3.4M, 2019 $5.3M, 2020 $1.2M, 2021 $1.9M, 2022 -$2.5M, 2023 -$5.2M, 2024 -$2.3M, 2025 $1.5M and 2026 -$1.5M. Interest paid is negligible, so cash flow before lenders is essentially the same. The business is cyclical. Revenue rose from $20M to $35M between 2017 and 2021, then fell to $19M by 2023 as defense and space orders dried up. During the downturn the company opened the Allentown plant and spent heavily on legal and accounting work tied to a restatement of earlier results. An SEC action against the company was dismissed in fiscal 2026. Fiscal 2026 lost money even though sales grew, because gold, tariffs on imported parts, labor and health-insurance costs pushed cost of sales up 12%. We use the median of the full ten-year cycle, about $1.35M a year (about $0.52 per diluted share on 2.59M shares), as the normal earning power. The window covers both the upswing and the downturn. What has changed: the order backlog was $27.8M at March 31, 2026, against $12.4M a year earlier, driven by defense orders and the recovery in commercial aircraft production. The first quarter of fiscal 2027 confirmed it: revenue of $10.0M against $6.3M a year earlier, and an operating profit of $0.66M against a $0.76M loss. Owner earnings fell from +$1.5M to -$1.5M in the last full year. We still start year one above that, at $2.2M in the base case, because the doubled backlog and the June-quarter results are in the filings. Beyond the backlog we credit no growth. Ten years of history show no steady, repeatable expansion in earnings, only a cycle. Balance sheet: cash was $9.36M at June 30, 2026. We hold back about $2M as operating cash for a business now building inventory against its backlog, leaving $7.36M surplus. Debt is a $0.40M equipment loan from Chase at a fixed 5.51%, close enough to our 6% rate that it needs no adjustment. The $1M Chase revolver was undrawn. The company missed its fixed-charge-coverage covenant at March 2026 and the bank waived it. That matters little while the company holds this much cash, but it would matter in a long downturn. Bear case ($3.90/share): the backlog ships but at fiscal-2026 cost levels, earning $0.8M in year one. Then the 2022-2024 pattern repeats: concentrated defense and space programs slow, giving losses of $1.5M, $1.5M and $0.8M over the next three years, funded from cash. Earnings then recover only to $0.9M a year, and we give no credit beyond year 15. The business is worth about $3.2M; add $7.4M of surplus cash and subtract $0.4M of debt for about $10.1M of equity. Most of this case's value is the cash. Base case ($10.17/share): the backlog lifts year one to $2.2M. Earnings then settle at the ten-year median of $1.35M a year for 30 years in total. That length reflects nearly 60 years of supplying Hyperboloid connectors on military qualified lists, where parts are designed into long-lived platforms. The business is worth about $19.4M; add $7.4M of surplus cash and subtract $0.4M of debt for about $26.3M. Bull case ($15.43/share): the defense and commercial aircraft demand behind the backlog holds and the new Allentown machining reduces reliance on outside parts. Earnings are $3.0M and $2.6M in the first two years, then $2.2M a year for 35 years in total. That level is below the $3.4M-$5.3M the company earned in fiscal 2018-2019. The business is worth about $33.0M; with cash and debt, equity is about $40.0M. What would make this wrong: losing the 23.5% customer, a long pause in defense or space programs, or gold and tariff costs that cannot be passed on would push results toward the bear case. Sustained revenue near the first quarter's $40M annual pace with today's cost base would push them toward the bull case. Our earlier estimate was $10.58 base, $4.26 bear and $43.37 bull. The base is little changed. The bull case is much lower because we no longer let peak-year earnings compound indefinitely. The bear case is slightly lower because it now includes a repeat of the 2022-2024 losses and keeps some cash for operations. The more cautious margin-of-safety price reflects the company's very small size, its customer concentration and its history of losses through the cycle.