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Why Rada Electronic Stock Just Popped 10%

By Rich Smith - Feb 8, 2021 at 2:40PM

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Should you put this fast-growing defense stock on your radar?

What happened

Shares of Israeli defense contractor and radar specialist Rada Electronic (RADA 0.71%) jumped 10% in afternoon trading on the Nasdaq Monday. There's no news to explain the jump...yet.

But that could change on Wednesday.

Green radar screen with multiple blips.

Image source: Getty Images.

So what

Rada announced late last week that it will report its fiscal fourth-quarter and full-year 2020 earnings on the morning of Wednesday, Feb. 10. Management didn't give any hints as to whether the news will be good or bad, but analysts seem pretty sure about what the earnings will reveal.  

According to predictions compiled by Yahoo! Finance, analysts are looking for Rada to report a $0.05 per-share profit for Q4, reversing the company's year-ago loss. Sales are expected to simply explode -- up 60% year over year to $22.7 million.  

The full-year numbers could look even better. Analysts see Rada reporting a $0.14 per-share profit for the year as a whole and sales growth of 74% at $75.8 million.

Now what

Would these numbers (if the predictions are accurate) make Rada stock a buy? That depends on what you're interested in when shopping for a stock. If it's value, for example, then $0.14 per share in profits makes Rada shares look pretty pricey at $12.50 a share -- about 89 times current-year earnings.

On the other hand, if it's growth you're looking for, well, there aren't a whole lot of stocks growing at 74% or so annually -- certainly not in the defense industry. If and when Rada succeeds in translating 74% sales growth into 74% earnings growth, 89 times earnings might not look quite as bad a bargain as it presently seems.

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Stocks Mentioned

RADA Electronic Industries Ltd. Stock Quote
RADA Electronic Industries Ltd.
$11.35 (0.71%) $0.08

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