Back in 2002, this stock hit a record low of $3.90. In the same year, the earnings per share were a negative 18 cents. Since then, the stock price and the earnings have improved dramatically. The stock is currently trading at $31 a share and the earnings are forecast to be $1.50 this year, up from $1.27 last year. Look for $1.75 next year. Revenues have almost doubled since 2004 when they were $346 million. Analysts are expecting $600 million this year and $700 million next year. They're looking for earnings to grow, on average, 19.5% a year over the next 5 years while revenues ramp at 13.5% a year, on average, in the same time frame.
There's an ever increasing demand for satellite communications technology for military and commercial applications. New contracts awarded to VSAT rose 18% in the last year, up to $525 million. The backlog now sits at $389 million. Foreign military customers are putting in more orders, ones like the Turkish Air Force and the Taiwan Ministry of Defense.
Last year, VSAT bought two companies: Intelligent Compression Technologies, a data compression developer that increases the speed of broadband, wireless, and satellite services; and Enerdyne Technologies, a video data link system designer specializing in military surveillance applications.
A few numbers: Current assets are almost 3 times current liabilities, including $100 million in cash. Return on equity has improved every year since 2003, expected to be 12.5% this year, 13% next. Net profit margin is stuck at 7.7%. Stock is a little over 2 times book value. Officers and directors own more than 18% of the stock. Market Cap is $900 million.
This is still a small stock, but it's growing in the right ways: sales and profits both improving with profits outracing revenues, a sign of better efficiencies. There's no question that in this age of terrorism secure communications is a needed service and will only see demand grow. VSAT is in the right business at the right time. If it keeps executing as it has in the last 5 years, VSAT should continue to see its stock do well.
The Good: Earnings jumped 27% in 2006.
The Bad: High valuation.
The Beautiful: Increasing demand, home and abroad, for products.
VSAT 1-yr chart