|Written by GSCR Staff|
|Wednesday, 09 July 2014 08:36|
Several weeks back we mentioned the ‘sin’ plays, with defense being one sector to get some gains out of this summer.
This could accelerate with all of the turmoil going on. In the eternal inferno of the Middle East we have even higher than normal tensions between Israel and its neighbors in Gaza and the West Bank over teenage murders and kidnappings. In Iraq we are close to having a terrorist state with Isis at the helm. Closer to home, we have a crisis at our border with Mexico with a flood of illegal aliens. While the violence and chaos is not something we condone, the objective is to find some ways to benefit in your satellite accounts.
Way back in April 2013 we featured Innovative Solutions & Support, Inc. (NASDAQ – ISSC - $7.07) in the Market Monitor. The stock took off to over the $9 price level in less than a month at that time and has been up and down since, currently right at the 30% increase in price level mark since our first article. We believe the stock will benefit from an accumulation in defense given some of the political factors mentioned above.
The Company is a systems integrator that designs, manufactures, sells, and services flight guidance and cockpit display systems to a broad customer base that includes the U.S. Department of Defense. There is no telling what kind of involvement the U.S. military could have in the areas above, but at a minimum air strikes and surveillance would seem a forthcoming response. This factor could lead to an influx of capital to ISSC.
Looking at our P/E and growth metrics the stock is an attractive buy. The trailing versus the forward 12-month P/E are 56 versus 16 on 41% growth forecast for FY2014 and 14% growth for FY2014 in top line revenue. The 5-year PEG is a low of 1.7. Another good sign is the short float of 5%.
ISSC is very bullish in the short to intermediate term in the Daily Moving Average technical analysis metric. We think the stock is a good one to pile on and could climb another 25% be the end of 3Q, market declines notwithstanding.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports.
Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.
It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.
This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.
ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com