A Business Turnaround With a Long and Profitable Runway
Tailwinds Incoming
I’ve had this stock on my watchlist for the last couple of weeks but neglected to dive into researching it because frankly, I’ve had a lot of good stock suggestions that peaked my interest presented to me via private messages here or on X. Now that I’ve knocked a couple of those companies off of my list I’ve turned my attention back to this business.
In my classic investment fashion this company has an EV significantly lower than their market cap, at $12.9 million over a market cap of $21.9 million. This company has been around since 1941 but has had a rough last couple of years. The headwinds that created these problems included Boeing’s 737ZMax problems, Covid-19 dampening travel, and a shift in defense spending priorities and posturing. This company also experienced some major problems with inventory discrepancies when they migrated to SAP from their MRP software format which caused problems with the company’s financial reporting. Now the company has a new CFO, has rectified their reporting issues, and is profitable once again. The other tailwinds this company was facing have now either faded away, like in the case of the COVID-19 travel restrictions, or have turned into tailwinds.
Boeing ($BA) has accelerated their orders, they’ve seen increased orders from Airbus ($EADSF), there’s been a resurgence in defense spending, and this company has seen growth from the commercial space launch industry from a company called Ascendant Spaceflight Services. The company plans to grow its future revenues by further expanding into the commercial space market. This company makes a very specific product that’s needed in all of these applications and is the only independent producer of this good in the United States. This should act as a moat within itself as the company’s largest revenue stream comes from defense spending and the U.S.’s military has to, when possible, source their materials from domestic suppliers. On top of all of this the company I’m talking about also plans to expand its products into the industrial and medical devices sectors as well.