Strong Market Environment for AeroVironment
|Written by GSCR Staff|
|Thursday, 14 July 2016 05:33|
In Monday’s Goldman Guide we had a lengthy discussion on the changing market dynamics prevalent today. With all the chaos and violence here in the U.S. and abroad we have strong convictions about defense stocks over the next year.
We are highlighting a new pick today in the small cap space, AeroVironment, Inc. (NASDAQ – AVAV - $27.60). Below is the one-year chart that illustrates the stock is coming off of a 52-week bottom in October and it may be time to buy again on a dip from a relative high of $32.44 a little over a month ago.
AVAV 1-Year Chart
AeroVironment Inc. designs, develops, produces, supports, and operates unmanned aircraft systems (UAS) and efficient energy systems (EES) in the United States and internationally. The Company offers small UAS products to deliver intelligence, surveillance, and reconnaissance; and communications, such as real-time tactical reconnaissance, tracking, combat assessment, and geographic data to the small tactical unit or individual operator. Its small UAS wirelessly transmit critical live video and other information to a hand-held ground control unit enabling the operator to view and capture images; ground control systems allow the operator to control the aircrafts; and tactical missile systems designed to be reusable for flights under normal operating circumstances and can be recovered through an autonomous landing feature that enables a controlled descent to a designated location. The Company also provides spare equipment, alternative payload modules, batteries, and chargers; repair, refurbishment and replacement, training, and customer support services to small UAS; turnkey mission services; and contract engineering services. In addition, it offers electric vehicle charging systems, services, and related solutions for plug-in passenger and fleet vehicles; PosiCharge industrial electric vehicle charging systems for electric material handling vehicles and airport ground support equipment; and power cycling and test systems for developers and manufacturers of electric vehicles, as well as battery packs, electric motors, and fuel cells. The Company sells EES products directly through sales force; and through retailers, resellers, industrial battery and lift-truck dealers, and distributors and representatives. It serves the U.S. Department of Defense, including the U.S. Army, Marine Corps, Special Operations Command, and Air Force, as well as commercial, consumer, and government customers.
Let’s examine the numbers for AVAV. First, our crucial P/E comparison. The forward P/E of 50 versus the trailing P/E of 71 on 7% CAGR on revenue over the next two years according to Wall Street consensus. Next, our cash versus debt picture looks extremely positive as well. As of the end of April 2016, AeroVironment had $228 million cash on hand with only $840,000 in debt. Finally, back to the technical front, a short float of 5.7% indicates strong conviction on the buy side.
As we stated in this week’s Guide, we believe the 2016 Presidential Election will be inconsequential when it comes to increased spending on defense and related technologies. AeroVironment has an established brand with solid products to benefit from this market growth. Look for AVAV to surpass the 52-week high and get back up to $35 by the end of the year.
Have a great day!
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