Forbes.com quotes Cabot Chief Investment Strategist Timothy Lutts’ review of AeroVironment in John Dubosz’s article, “Drones Today, Electric Cars Tomorrow?” in Forbes.com’s February 2, 2009 Stock of the Week. Lutts’ review of AeroVironment had previously appeared in the January 15 edition of Cabot Wealth Advisory.
Here are excerpts:
“Timothy Lutts, publisher of the Cabot Wealth Advisory, is like many growth stock investors; he is on the hunt for the “next Apple.” Apple traded in the single-digits as the iPod began to catch on in the early part of this decade, but went on to peak just above $200 a share in December 2007.
“Lutts recently wrote that Apple best days as a growth stock are behind it and that investors need to ask a series of questions to find another growth idea with a potential future as bright as Apple’s past. Asks Lutts: “What company serves a mass market, is profitable, has terrific prospects for growing revenues and earnings rapidly, can ride a wave of societal evolution and is not yet loved by the majority of investors?”
“He comes up with AeroVironment (AVAV), a big player in unmanned aerial drone aircraft for the military and a leader in battery technology for electrically powered vehicles.
“The late Dr. Paul MacCready, founder of AeroVironment in 1971, was a champion glider pilot and aeronautical engineer who created the first practical human-powered plane, the Gossamer Condor, in 1977 with Dr. Peter Lissaman. His Solar Challenger, in 1981, set records for highest, farthest and longest solar-powered manned flight.
“In 1987, his Sunraycer, created in partnership with General Motors and Hughes Aircraft, won the world’s first solar-powered car race, traveling across Australia, north to south, in 5.2 days,” says Lutts. “The second place car arrived two days later.”
“AeroVironment today is busy with the design and manufacture of unmanned aircraft systems (UAS), the remote-controlled, hand-launched planes that survey the skies over the war zones of Iraq and Afghanistan.
“The U.S. Army accounts for 62% of revenues, while other U.S. government agencies account for 22%, and that business is golden,” says Lutts. “AeroVironment has won all four known projects for such aircraft put up for bid by the Pentagon.”
“While the military contracts have kept the cash flowing into AeroVironment, the company’s future designs are what could make it as big of a winner as Apple.
“The company makes a system called PosiCharge, basically a fuel pump to recharge an electric battery,” writes Brendan Coffey, editor of Cabot Green Investor. “Since electric systems are making inroads into industrial uses, such as forklifts, PosiCharge is finding early acceptance there. In December, the company sold a system to electric truck maker Balgon to be used with its trucks in the Port of Los Angeles, which mandates that on-site equipment be electric powered. In September, AeroVironment reached a deal with heavy equipment dealer Toyota Material Handling USA to market the system.”
“There is at least talk in Washington of providing additional incentives for development of electric car infrastructure and AeroVironment would until it’s free of debt with $120 million in cash on hand and its main client--the U.S. government--is the most reliable payer around,” observes Coffey.
“AeroVironment has been a success story so far as a public company, coming out in January 2007 at $17, and now it trades for $36.
“It’s been doing well, especially considering the horrible market of the past year, but the stock is still not expensive,” says Lutts. AVAV trades at 3.2 times revenues, with a P/E ratio of 28 and no debt. Revenues grew 22% to $65.8 million in the latest quarter, while earnings soared 71% to $0.41 per share or $9.06 million.”
Link to article on forbes.com
Information on Cabot Green Investor
More Cabot in the News
Cabot Home
Sign up for free Cabot Wealth Advisory e-newsletter