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When investing in a stock in the dark, cold days of early January, the idea that it might already be triplicate At the end of August, things are expected to heat up! But that is exactly what has happened with filteric (LSE:FTC). Just a few months ago it was a penny stock and so far in 2024 it is up 252%. What a return!
Another big returning customer is Filtronic, which announced today (August 30) that rocket company SpaceX has placed an additional production order for its E-band solid-state power amplifier modules. These will be used to help SpaceX scale up its Starlink satellite internet service.
Filtronic said the order, valued at approximately £6.4m, means it now expects to trade above expectations in its 2025 financial year.
As an investor, have I missed the opportunity to invest in this penny stock? Or is it possible that its stock price, as well as that of its products, are still on their way to the stars?
Mixed financial history
With £25m in revenue last year, that £6.4m contract is significant for Filtronic. I also think the fact that a customer with SpaceX’s high technical demand is coming back with a large repeat order is a powerful endorsement of Filtronic’s offering. It could help attract other customers, opening the door to revenue growth not just for SpaceX but for other companies as well.
But when it comes to the numbers, revenue has historically not been as big a challenge for Filtronic as profit. Last year's profit of £3.1m after tax was decent. But the year before, the figure had been less than a sixth of that.
That helps explain the crazy ride he's had. But what happens now?
Could the prospect of continued revenue growth mean that fixed costs can be spread more efficiently, further improving the bottom line? Or could maintaining large contracts strain a modestly sized company and lead to expenses that drag it back into the red, as happened a few years ago?
I am tempted to buy
Time will tell and anything could happen, but I am optimistic. Last month Filtronic announced a multi-million dollar order to SpaceX, and now it has announced another.
If it manages to significantly increase sales, I think the company could increase profit margins. It is an expert in a specialized field. Customers are willing to pay well: no smart customer wants to risk losing an enormously expensive satellite because they skimped on buying the right components.
The rise in the stock price this year has been incredible, but in five years, the stock has skyrocketed 944%!
The price-to-earnings (P/E) ratio of 53 is too high for my taste, but if I'm right about the prospect of rapid earnings growth, the forward-looking P/E ratio could be lower.
I am tempted to invest in this case and will consider buying Filtronic in September.
