This is the first in a series of articles about Israel-based companies that appear to be a potential investment opportunity. People ask me my opinion when I speak to community and business groups how they can best help Israel and participate in the growth of the startup nation? Always consult your broker, lawyer, and accountant before making investments.
Disclaimer: Please be advised that neither the author or Life in Israel, its affiliates, its employees or agents accept liability for any errors, omissions or damages caused by this communication or its attachments, or which may otherwise arise as a result of this communication transmission. Dr. Harold Goldmeier, Business Teacher and Consultant
- Elbit Systems is a small but innovative cutting-edge designer of high technology military defense weapons and systems it sells worldwide.
- It is consistently profitable, financially stable, covers its debt service, and shares are a potential opportunity at the current price for a 25% gain.
- The stock gets short shrift from analysts and the media, but the stock is doing better than the defense ETF and the stock market.
Aigars Reinholds/iStock via Getty Images
Elbit Systems Ltd. (NASDAQ:ESLT) is an overlooked, undervalued $8.77B defense contractor based in Israel. Our average price target over the next 12 months is in the $250 per share range; that's an upside of 25% from the current price.
Our bullish position extends back to my article about ESLT two years ago, when I characterized Elbit as firing on all cylinders.
Killer Weapons Innovation
Defense expenditures flew past the $2T mark in 2021. Military expenditures on average are 5.9% of world gross domestic product. Elbit is well-positioned to build revenue in the growing essential defense industry.
War is now a high-tech event, with ground soldiers hiding in forests using computerized mobile weapons to shoot down enemy aircraft. Nary a rifle was fired in 2021 between Israel and Gaza or since then. Guided missiles are the tactical weapons of choice, countered by the notable Iron Dome missile defense umbrella.
Elbit is a leader, developing the next defense technology, laser systems for military defense. The market is enormous, in part because it costs $50K for each Iron Dome Interception missile compared to the $2 per laser-fired defense beam.
Elbit Systems Ltd. develops airborne, land, and naval systems. On the commercial side, Elbit has products for homeland security and commercial aviation applications. The company is expanding its portfolio of innovative technologies in unmanned aircraft systems, advanced electro-optics, electro-optic space systems, signal intelligence systems, data links and communications systems, radios, cyber-based systems, munitions and equipment for cyber intelligence.
Financial Strength
In May '22, the company reported quarterly earnings for Q1. Its Non-GAAP EPS was $1.22 on a 21.6% increase in revenue Y/Y. Q1 Non-GAAP gross profit amounted to $333.3M, which is 24.6% of revenues compared to $286.2M (25.6% of revenues) in Q1 '21. Order backlogs near $14M. Management scheduled ~ 55% of the order backlog to be performed this year and next.
The financial outlook is good. The P/E is 24.84. There is virtually no short interest. The shares are not volatile, and we do not foresee any serious risks to the stock. Growth and profitability appear they will stay positive. Shares are undervalued. Interest and debt payments are covered. An Israel rating agency announced in June '22 that ESLT has "a stable outlook."
To read the full article including risks with investing in Elbit, see https://seekingalpha.com/article/4519782-elbit-systems-inc-will-march-along
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