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ArmorGroup International (OTC:AMGPF) released results for the first six months of the year last week. It was a mixed bag, pretty much what was expected.

The bad news is that a lucrative Iraq security training contract has been completed and that rising administrative costs have reduced operating profits, even while sales rose by 30%. The good news is that the company reports success in halting the decline of profit margins in Iraq despite the fierce competition among Private Security Companies in the country.

More good news is that sales of ArmorGroup’s protective security services rose sharply in Iraq, Afghanistan and Nigeria -- where the company works for oil companies. ArmorGroup’s solid experience in working for oil companies leaves it well-placed to grow business in the sector. And the same may prove true for other extractive industries as well.

Plus, non-Iraq business now accounts for 48% of ArmorGroup revenues, up from 40% last year.

Yes, there are still challenges facing the company. But it has an excellent reputation, works for high end clients, and has a global footprint. All that, and the market capitalization is only about $58 million.

I’d be delighted to see ArmorGroup continue growing its business while reducing costs, making strategic acquisitions, and see its share price rise accordingly. Yet its market cap means it could easily get bought by a bigger PSC -- perhaps an American one.

That's not a prediction. Just a very distinct possibility. You can read my rationale for buying this stock here.

The author holds a position in this company.

Source: ArmorGroup Continues Diversifying Away from Iraq