That admonition aside, results for the fiscal fourth quarter did indeed look quite good. Sales jumped 66% and net income increased by a nearly similar amount, excluding a year-ago charge. Top- and bottom-line numbers were both ahead of the relatively few analyst estimates, and the quarter-end backlog was nearly double the year-ago level.
Cash flow management was also excellent for the quarter and fiscal year. Full-year free cash flow came to $46.5 million -- a 163% gain over last year. While both inventory and accounts receivable are on the upswing, so are accounts payable. Stepping back to look at the big picture, I'm not that worried about working capital management here, since the increases are not at all disproportionate to the growth of the business.
Sure, Comtech is not without competition -- the company has to deal with the likes of ViaSat
Communications demand seems to show no signs of letting up; we're still in the early days of broadband and the infancy of voice over Internet protocol (VoIP). What's more, there will be ongoing demand from the military for increasingly sophisticated and secure communications systems, not to mention civilian demand for wireless and satellite communication and other applications.
Comtech is something of a rare find -- a growing high-tech company with a reasonable valuation based upon solid free cash flow. I wouldn't want to delude anyone into thinking this was a risk-free opportunity, but I do think it has a better-than-average chance of continuing to be a winner for patient investors.
For more high-orbit takes:
- Sirius Streams Deep
- More Channels for Mobile Radio
- A Stellar Way to Lose Money
- Comtech Heads to a Higher Orbit
Seeking small-cap companies with big potential? Plug in to Motley Fool Hidden Gems , where Tom Gardner and Bill Mann seek out the superb stocks the market ignores. Sign up today for a 30-day free trial subscription.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).