AeroVironment Lifts Off

Unmanned aerial vehicle maker AeroVironment (Nasdaq: AVAV  ) first went public back in January, but the stock didn't really take off until last week. Having done some aerial reconaissance of the company's prospects, I've uncovered some info that may send the stock into the wild blue yonder.

In its first earnings release as a public company (on fiscal Q3 2007 results), the slightly schizophrenic maker of

  1. PosiCharge systems for charging batteries quickly, and
  2. tiny unmanned aerial vehicles (UAVs) for the military

reported a 30% jump in sales versus Q3 of last year, and more than twice the profits of the previous year. As a result, investors bid the shares up 10% in a heartbeat.

As we continue to acquaint ourselves with this Nasdaq newcomer, let's first take a look at its most talked-about product: The Raven UAV. In contrast with larger UAVs such as Lockheed Martin's (NYSE: LMT  ) Polecat, Northrop Grumman's (NYSE: NOC  ) Global Hawk, or General Atomics' Predator, AeroVironment's Raven UAV weighs in at just four pounds, has a mere 4-foot wingspan, and is designed to be carried by as few as two infantrymen. Quite a small package.

A strained segue
Speaking of small packages, while I, too, was impressed with AeroVironment's sales and earnings growth, the facts that really got my attention lay deeper within the earnings report. I had to dig through the report, the subsequent 10-Q filing, and data provider Capital IQ to see this picture, but I think you'll agree when you see it that it's pretty indeed.

Super-positive inventory divergence
From my perspective, the best news out of AeroVironment is that its inventories are falling -- and in the best way possible. Not only are inventories overall down 13% year over year, but within that broader category, the worst parts -- piles of unsold, finished goods -- are getting smaller, while the best parts -- raw materials and works-in-progress -- are actually growing.

Put into plain English, these trends show that AeroVironment's products are "flying off the shelves," faster than the company can assemble them. To keep up with the demand, the firm is stocking up on raw materials and parts to make more.

Learn more about AeroVironment in:

And learn more about positive inventory divergence (and similar Foolish concepts) in: Foolish Fundamentals: Inventory.

Small caps. Large caps. Fool CAPS! The Motley Fool's investor-intelligence community rates thousands of stocks to help you improve your own stock selections. Join today for a fun new way to research stocks.

Fool contributor Rich Smith does not own shares of any company named above.


Read/Post Comments (0) | Recommend This Article (33)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 523676, ~/Articles/ArticleHandler.aspx, 8/23/2014 12:04:45 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement