Please ensure Javascript is enabled for purposes of website accessibility

NASA Rejects Trojan Horse

By Rich Smith - Updated Apr 5, 2017 at 7:53PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Resupply contracts for the International Space Station go to established players.

"NASA, rejecting aerospace giants Lockheed (NYSE:LMT) and Boeing (NYSE:BA), awarded $3.5 billion in contracts to start-up companies on Tuesday to deliver cargo to the International Space Station after the U.S. space shuttles are retired."
-- Reuters

On Christmas Eve-Eve, NASA finally announced the results of its long-running Commercial Resupply Services competition, and as the tidbit above correctly points out, neither Lockheed nor Boeing (nor Alliant Techsystems (NYSE:ATK), for that matter) wound up in the winners circle. What you may not know, is that none of these three companies were actually bidding for the contract at all, at least not directly.

Instead, these three giants of the aerospace industry chose to hitch their carts to a foal of a company named PlanetSpace, which acted as the prime contractor in the bid. Turns out, NASA was not amused -- nor impressed.

Instead of awarding its $3.5 billion in cosmic-milk-run contracts to "Big Space" in the person of little PlanetSpace, NASA went with trusted workhorses this time:

  • Orbital Sciences (NYSE:ORB) will make eight deliveries to the International Space Station, and be paid $1.9 billion for its trouble.
  • SpaceX -- the cosmic project that Elon Musk took up after selling his beloved PayPal to eBay (NASDAQ:EBAY) -- gets $1.6 billion to make a dozen runs.

Now, Reuters may consider these two firms "start-ups", but the fact is that unlike PlanetSpace, both have already been vetted by NASA, and found superior. In the recent Commercial Orbital Transportation Services (COTS) contest, for example, Motley Fool Rule Breakers recommendation Orbital (25 years old, and so hardly a start-up) received $171 million worth of funding. Meanwhile, SpaceX got off to a running start with a $278 million contract of its own. (Not bad for a start-up, eh?)

What's it mean to you?
Obviously, you cannot invest in privately held SpaceX and share in its success -- yet. Orbital, in contrast, has been racking up win after win in this cosmic sphere. Selling for a 17 P/E , and with long-term growth posited at only 15%, Orbital may not look like a great buy. But the company generates free cash flow far in excess of its reported GAAP earnings, and is moving fast to capture market share in the medium-size launch rocket business with its Taurus II vehicle.

Foolish takeaway
With a string of contract wins that just keeps growing, an attractive price, and sky-high growth prospects, this is one rocket stock that could well live up to its name.

For further reading on the final frontier, why not try out:

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Orbital ATK, Inc. Stock Quote
Orbital ATK, Inc.
eBay Inc. Stock Quote
eBay Inc.
$48.82 (5.06%) $2.35
The Boeing Company Stock Quote
The Boeing Company
$132.23 (3.52%) $4.50
Lockheed Martin Corporation Stock Quote
Lockheed Martin Corporation
$450.56 (0.57%) $2.57

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.