Firan Technology (TSX:FTG) is a manufacturer of aerospace and defence electronic products and subsystems. Shares of Firan have climbed over 80% in 2019 as of close on July 19. The company has generated positive hype on the back of record earnings.
In the second quarter, Firan reported sales of $32.2 million, which was up 12% from the prior year. EBITDA soared 54% year-over-year to $5.2 million and net income surged 88% to $2.5 million. Defence spending is ramping up across the developed world, particularly in the United States. The U.S. Senate approved a FY2020 military budget increase to $750 billion, while the House approved a lower but still-record number; $733 billion.
This means that investors should be eager to bet on smaller firms like Firan, which are in a good position to gobble up smaller contracts. In its second-quarter earnings release, Firan reiterated its intention to expand its offerings into the enormous U.S. defence market. Firan gained approval for the acquisition of a U.S.-based printed circuit board manufacturer in Q2 2019, which will bolster its position in this key area. Investors should expect that deal to close soon.
The company’s position in the growing defence market is promising, and Firan’s earnings have impressed of late. However, value investors may be taken aback at its valuation right now. The stock had an RSI of 75 as of close on July 19, which puts it in technically overbought territory. I love Firan as a long-term pickup, but savvy investors may want to be patient and await a more favourable entry point.
