Why Hillman Solutions Corp. (HLMN) is a Growing Risk and Where to Invest Instead

Hillman Solutions Corp. (HLMN), a manufacturer of fasteners and home repair products, has long been a stalwart in its niche. But recent financials reveal a company struggling to adapt to shifting market dynamics. With weak revenue growth, deteriorating margins, and a debt-laden balance sheet, HLMN now poses significant underperformance risks. Meanwhile, high-growth peers like FTAI Aviation (FTAI) are capitalizing on secular trends, making them far more compelling investments. Here's why you should avoid HLMN and pivot to better opportunities.

HLMN's Underperformance: The Numbers Don't Lie

HLMN's Q1 2025 results underscore its stagnation. Revenue rose just 2.6% to $359.3 million, with adjusted EBITDA up a meager 4.2% to $54.5 million. While management cited contributions from the Intex DIY acquisition, the real story is the erosion of cash flow and leverage.

• Operating Margins Are Slipping:
  HLMN's reported operating margin dipped to 4.18% in Q1 2025 from 4.66% a year earlier. Adjusted EBITDA margins improved slightly to 15.2%, but this masks a deeper issue. Rising tariffs and supply chain costs are squeezing profitability, and the company's inability to convert earnings into free cash flow—negative $21.3 million in Q1—is alarming.

• Debt Piles Up, Liquidity Strains:
  Gross debt hit $740 million, pushing the net debt-to-EBITDA ratio to 2.9x. Management aims to reduce leverage to 2.5x by year-end, but with free cash flow guidance withdrawn due to tariff uncertainties, this target feels optimistic.

• Capital Allocation Fails to Inspire:
  HLMN's strategy hinges on acquisitions and supply chain diversification, but these moves are not translating into shareholder value. The company hasn't returned capital via dividends or buybacks in years, and its SKUs—though extensive—are commoditized in a low-growth market.

The Superior Alternative: FTAI Aviation (FTAI) Soars While HLMN Struggles

While HLMN treads water, FTAI Aviation is a textbook example of a company capitalizing on secular growth. Here's why FTAI is the better bet:

• Explosive Revenue Growth:
  FTAI's Q1 2025 revenue surged 54% to $502 million, driven by aerospace products (up 98%) and strong leasing demand. Its strategic partnership (SCI) anchors a recurring revenue model, with 98 aircraft owned or under LOI and production ramping to 200+ modules per quarter.

• Margin Expansion and Strong Cash Flow:
  Adjusted EBITDA margins hit 53.5%, nearly double HLMN's, and free cash flow guidance for 2025 remains robust at $650 million. FTAI's ability to scale efficiently while maintaining pricing power is unmatched.

• Capital Allocation Excellence:
  FTAI is deploying $4 billion+ in strategic capital to expand production and inventory, while targeting a 3x leverage ratio. Dividends are growing, and the company is aggressively capturing untapped markets in Asia and Europe.

The Macro Tailwinds Favor FTAI, Not HLMN

The current environment of cooling inflation and falling rates benefits companies with strong margins and scalable models. FTAI's high-margin aerospace business and recurring lease income are recession-resistant. In contrast, HLMN's reliance on low-margin home repair products and tariff-sensitive supply chains makes it vulnerable to cost pressures.

Investment Thesis: Sell HLMN, Buy FTAI

• Avoid HLMN: Its 2.6% revenue growth, deteriorating free cash flow, and rising debt make it a poor risk-reward bet. Investors should exit before leverage ratios worsen or tariffs hit margins harder.

• Go All-In on FTAI: With 54% revenue growth, industry-leading margins, and a clear path to debt reduction, FTAI is positioned to dominate aerospace and leasing markets. Its valuation—while not cheap—is justified by its growth trajectory.

Final Take

HLMN is a cautionary tale of a legacy company failing to evolve. FTAI, by contrast, exemplifies how to capitalize on structural trends. As interest rates decline and investors prioritize quality, the choice is clear: dump HLMN and pivot to FTAI before it leaves you in the dust.

Disclosure: This analysis is for educational purposes. Always conduct your own research or consult a financial advisor before making investment decisions.