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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