Meet the Monster Stock that Continues to Crush the Market

Be sure to diversify. Think long-term. Don’t let emotions cloud your judgments.

Inexperienced investors often hear the same nuggets of wisdom over and over again as they embark on their investing journeys. But something even savvy investors must occasionally remember is that investing isn’t a popularity contest. Although there are the company names frequently found in the headlines, there are other businesses that are much lesser-known, yet also warrant attention.

Howmet Aerospace (HWM -3.05%), for example, is a name most investors likely won’t recognize. However, the company has significantly outperformed the S&P 500 so far this year. While the S&P 500 has remained about flat, shares of Howmet have gained some 17% in altitude, a small example of how significant Howmet has soared higher than the S&P 500. Forget popularity — this aerospace company’s impressive stock performance suggests that it’s a name that deserves to be on investors’ radars.

Getting to know Howmet

As it’s known today, Howmet has only been around since April 2020, when it was spun off from Arconic, which itself resulted from Alcoa separating it into an independent publicly traded company in 2016.

From airfoils to landing gear components, Howmet designs and manufactures a wide variety of parts that enable more fuel-efficient aircraft. This aspect of the company’s business applies to commercial aircraft as well as those used in defense applications. In addition to aerospace, the company makes parts found in other industrial applications such as gas turbines, commercial trucks, and solar panels.

All told, Howmet boasts 940 granted patents and 215 pending patent applications for designs and production processes — all of which help it stay ahead of the competition.

While the company’s reach extends into a variety of businesses, aerospace represents the company’s bread and butter — about 68% of revenue in 2024. And of that, customers from the commercial market drove the majority of these sales, accounting for 52% of the segment’s revenue in 2024. Commercial transportation and industrial businesses are split fairly evenly representing sales of 17% and 15%, respectively.

Strong free cash flow is just one source of lift for Howmet stock

With its nearly 25% rise through the first two months of 2025, Howmet is one of the strongest performing stocks in the S&P 500. Expand the time horizon, however, and the stock’s exceptional performance becomes even more apparent. Since it started trading under the stock ticker HWM on April 1, 2020, shares of Howmet have rocketed 935% higher while the S&P 500 has climbed 141%.

Instead of pinning the market’s appetite on one catalyst, it’s likely that investor appetite for Howmet can be attributed to a couple of things. For one, it has succeeded in generating increasingly higher free cash flow in each year since its separation from Arconic. In 2024, Howmet generated $977 million in free cash flow, a 43% increase over the $682 million it generated in 2023. Management, moreover, projects continued free-cash-flow growth in the coming year, forecasting free cash flow of $1.025 billion to $1.125 billion.

HWM Free Cash Flow (Annual) data by YCharts.

The income statement has provided another source of encouragement for investors. Since its first full year as a fully independent company, Howmet has succeeded in improving its profitability, expanding its earnings before interest, taxes, depreciation, and amortization (EBITDA) margin each year. This has helped the company maintain sound financial health. It ended 2024, for example, with a ratio of net debt to adjusted EBITDA of 1.4, illustrating how it’s not overly reliant on leverage.

Is now a good time to take flight with Howmet Aerospace?

It’s clear that there’s good reason the market has embraced Howmet Aerospace over the past five years. At this point, prospective investors should recognize that Howmet stock doesn’t come cheap. Shares are changing hands now at 35.8 times operating cash flow, a premium to their five-year average cash-flow multiple of 13.9, so waiting for a pullback isn’t necessarily a bad idea.