In the aerospace market, people generally think of the overall makers of the planes such as Boeing Co. (NYSE: BA) or maybe an airline group such as US Airways Group, Inc. (NYSE: LCC). However, there are other ways to play the industry that both airplane makers and airliners demand; parts to build the planes. One such company is LMI Aerospace Inc. (NASDAQ: LMIA). As stated before, LMI is a company that supplies companies like Boeing with assembly kits and tools needed to build the airplane. That means the more orders Boeing gets for new planes, the more orders LMI gets for kits and tools.
In December of 2012, LMI announced plans to purchase rival, Valent Aerostructures LLC for $237 million and $9.7 million in certain obligations. Valent was a good buy for LMI because it added to the company's exposure and reputation for supplying aerospace parts to the commercial, private and defense industries. This will help LMI maintain long-term growth figures.
Looking at the fundamentals of LMI, the company is currently valued at $263.76 million and currently holds a buy rating from analysts. The company has a price to earnings ratio of 13.24 and a forward price to earnings of 10. Currently, the stock is trading at a discount to future growth with a PEG of 0.98 and a discount to its sales with a price to sales of 0.97. Earnings are expected to rise 26 percent this year and 22 percent next year. LMI has very low cash reserves right now as it just completed its acquisition of Valent. Cash per share comes in at 0.01. However, the total debt load is extremely monomial with debt to equity at .01.
Looking at the technicals, the price action currently trades at $22.51, very close to its upward sloping resistance of $23. However, LMI's first support is not far behind at $21.40, this could help the stock prepare for a breakout to the upside. Second support comes in at $18.98 and third support comes in at $17.45. As you can see, the stock has a variety of strong support trend lines that will help support the stock to potentially breakout. However, I would wait till the price action is back at support before buying. Currently, the stock is trading 16 percent above its 200 day moving average, 6 percent above its 50 day moving average and 1 percent above its 20 day moving average. This shows that the stock is in a strong bullish trend that may be able to put some serious strain on the resistance line.
The bottom line here is that LMI Aerospace Inc. is well placed to profit from the success of new plane orders or remodeling. As a supplier of plane components, the stock is more susceptible to unfriendly business conditions but as orders continue to come in for the 787 Dreamliner (despite the battery issue), this could spell profits for LMI.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.