Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

CPI Aerostructures = Expansion, Value, Safety

|Includes:CPI Aerostructures, Inc (CVU)

Back in June CPI Aerostructures (NYSEMKT:CVU) completed a one million share offering priced at $12.00. As a retail investor myself, I generally assume the interests involved in buying these shares are more intimately aware of a company's plans to create value higher than this price point and are more sophisticated than myself overall.

After first finding CVU while searching for companies with favorable metrics and potential, and further reading upon the company's recent filings and January 22nd's investor presentation, I have come to a conclusion.

CVU is great value at any point below the last common offering ($12) and should be of significant value 10-20% above the common offering for an investor with a long term horizon.

After all it is pretty hard to argue against a company with low teen net income margins selling between 6-8x projected 12-month forward earnings and 25% projected EPS growth over the next five years. On paper it would seem like a no brainer.

Here are some of what I believe to be important points from the recent investor presentation for Noble Financial Capital Markets.

  • Strong 9M'12 Results vs. 9M'11:
  • Revenue increased by 23.7% to $61.9 million
  • Net income increased by 56.2% to $7.4 million
  • Moved to a larger 171,000 sq. ft. facility in December 2011; expanded work force to 220 employees
  • Developing infrastructure to support large commercial aircraft programs
  • Well positioned on new military platforms that are surviving the deep cuts to overall military spending (E-2D Advanced Hawkeye, UH-60M BLACK HAWK)
  • Commercial programs with strong order backlogs and accelerating build rates

The forces that have kept CVU's stock down the past six months seem to be the assumed substantial cuts in defense spending and the share offering back in June. The company itself seems to be getting stronger with expansion, stronger capitalization, new revenue avenues and has the potential to score some seemingly unprecedented contracts which would send the stock price substantially higher.

In short, it's a company selling around 125 million (market cap + debt) that is guiding around 12 million in net income FY 2012 and analysts are projecting EPS growth of 25% over the next five years. It also has the second lowest P/E in the aerospace and defense industry (Erickson Air Crane being the lowest).

I would not be surprised to see $14.00 at some point in 2013 and a stock north of $20 within five years. It's an industrial story, which generally lends itself to a much firmer foundation on which to invest, and I would encourage the reader to do their own research on the potential of this well established and expanding supplier to the aerospace industry.

www.cpiaero.com/corporate-governance/investor-relations/

Disclosure: I am long CVU.

Stocks: CVU