VSE Corporation (VSEC): Evaluating Valuation Following Industry Index Inclusion and Earnings Anticipation

VSE (VSEC) recently landed a spot in the S&P Aerospace & Defense Select Industry Index, a move that could put the company on more institutional investors’ radar because of its ongoing progress in aviation services.

See our latest analysis for VSE.

VSE’s inclusion in the S&P Aerospace & Defense Select Industry Index last month adds to an already impressive stretch for the company, as anticipation builds around its upcoming Q3 earnings results. The latest 1-day and 7-day share price returns show some near-term pullback, but this comes after a 66.8% share price return year to date and a 73.7% total shareholder return over the last 12 months. Both short- and long-term momentum remain strong, supported by consistent revenue growth and rising operational efficiency, keeping investor interest high.

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With share price gains outpacing many industry peers and another earnings report around the corner, the big question now is whether VSE remains undervalued or if the market has already factored in the company’s future growth trajectory.

Most Popular Narrative: 15.4% Undervalued

VSE’s most widely followed valuation narrative places fair value at $183.12, implying considerable upside from the last close of $154.96. This frames VSE as potentially undervalued if management delivers on ambitious growth goals embedded in the narrative.

Significant investments and recent strategic acquisitions (TCI, Kellstrom, Turbine Weld) are expanding VSE’s capacity and footprint in higher-growth, higher-margin aftermarket aviation distribution and MRO services. This supports robust future revenue growth and diversification of the customer base. VSE’s focus on next-generation engine platforms and development of proprietary repair capabilities, along with deepening OEM partnerships (for example, with Eaton and Honeywell), positions the company to benefit from continued increases in engine aftermarket demand due to aging aircraft fleets and global fleet growth, which could drive recurring, stable revenue streams.

Read the complete narrative.

Why does this valuation see more room to run? It comes down to bold forecasts for future growth, rising margins, and upgraded competitive positioning. These are key details that could transform expectations. Want to uncover the precise growth assumptions and profit targets driving this high fair value? Find out by diving into the full narrative.

Result: Fair Value of $183.12 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, if industry demand for legacy engines declines or if integration challenges from recent acquisitions arise, VSE’s growth story could face unexpected obstacles.

Find out about the key risks to this VSE narrative.

Another View: DCF Model Suggests Overvaluation

While the consensus analyst narrative points to VSE being undervalued, our DCF model paints a very different picture. It estimates VSE’s fair value at $89.73, which is well below the current market price. This method suggests investors may be pricing in more growth than fundamentals justify. Could analyst optimism be too high?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out VSE for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

Build Your Own VSE Narrative

If you see the numbers differently or want to build your own outlook, you can create a personalized narrative in just a few minutes. Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding VSE.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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