We remain very bullish on the prospects for the aerospace and defence sector in 2023. Russia's decision to invade Ukraine and China's ongoing sabre rattling over Taiwan mean countries are spending more on defence. For investors, the key is finding the undervalued opportunities that are out there. Here are five stocks in the space we're watching right now.
#1. VirTra Inc
Stock in VirTra [NASDAQ:VTSI] is up a punchy 65% in the last six months. Investors who owned it at $3.70 back in April will be congratulating themselves. The company is still trading on a PE of just over 19x. VirTra primarily provides VR-based training for law enforcement agencies, including via the use of a 300 degree small arms training system. The company delivered some great results on 15 May, including a record backlog of client orders, which is 20% higher than the previous period. Note also the new operations centre opened in Florida for the military market.
#2. CPI Aerostructures
A maker of components for aircraft, based in New York, CPI Aerostructures [NYSE:CVU] works primarily for the US Department of Defense and also acts as a subcontractor for both Boeing and Northrop Grumman. Stock is well up on where it was a year ago. The shares still look undervalued. The company came in with some good sales figures on 15 May, justifying investors' faith. It booked a 9.35% increase in sales. Brokers have a median target price of $4.00 factored in. CPI Aerostructures also just inked a manufacturing contract for pods to be used in an airborne electronic attack system being built by Raytheon Technologies.
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#3. Bet Shemesh Engines Holdings 1997
Based in Israel, Bet Shemesh Engines [TLV:BSEN] was founded in 1968. The stock is still looking a little expensive but the fundamentals look very solid indeed. In its December 2022 report Bet Shemesh booked 10.55% revenue growth and a net income growth rate of 508%. Diluted EPS was consequently up over 550%. Investors have been cautious in recent months but the share price has been creeping up slowly. This is a very diversified aerospace engineering company with both military and civilian applications. Like many other Israeli firms, it is highly vertically integrated, with machining and casting facilities at one end, and the actual manufacture of jet engines at the other.
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