Firefly Aerospace (FLY +9.61%) stock soared a lucky 7.7% through 11:20 a.m. ET Monday after the space stock announced, over the weekend, that it will purchase defense contractor SciTec for $855 million.
Firefly will pay $300 million in cash and hand over $555 million worth of stock at a $50-per-share valuation to acquire SciTec.
Image source: Getty Images.
Why buy Firefly?
It's curious that SciTec would agree to value Firefly stock at $50 a share when the stock closed closer to $27 a share last week. Then again, it's possible the parties negotiated the valuation weeks ago, when Firefly stock was worth a bit more.
Whatever SciTec's reasoning, Firefly's logic behind buying SciTec is clear: "The transaction aims to fuse Firefly's launch, lunar, and on-orbit services with SciTec's mission software, rapid data processing, and low-latency AI systems that support missile warning, tracking, and multi-domain operations."
SciTec is a specialist in missile warning and defense. It's also a company with $164 million in trailing-12-month revenue. Over that same period, Firefly itself collected less than $103 million in revenue.
In other words, by buying SciTec, Firefly will more than double its annual revenue stream and expand its own role in defense contracting.
NASDAQ: FLY
Key Data Points
Is Firefly Aerospace stock a buy?
In terms of valuation as well, this deal sounds like a win for Firefly. For one thing, Firefly somehow convinced SciTec to value its stock nearly twice as high as everyone else on the stock market does!
For another, paying $855 million to capture a $164 million revenue stream means Firefly will pay a price-to-sales ratio of only 5.2 for SciTec. Compared to Firefly's own sales valuation of 42, that's a steal of a deal.
