Is International Aerospace Enterprises Undervalued?
International Aerospace Enterprises Inc. (IARO) shares jumped more than 340 percent after it was notified of a $750,000 bid award for military aircraft spare parts by the Egyptian Air Force, but does that mean the stock is undervalued now?
International Aerospace Enterprises Inc. [[IARO.OB]], an innovative and aggressive provider of discounted military aircraft spare parts, received a $750,000 bid award for military aircraft spare parts by the Egyptian Air force. The award marks the first of over $13 million in the company’s international sales pipeline following a targeted worldwide sales program.
Since IAE has not reported any revenues since its inception, investors have very little information in terms of gross margins and profitability. However, selling and administrative expenses have totaled just $123,858 with unrealized losses on derivative securities leading to the majority of its $1.37 million net loss during the first quarter.
Unfortunately, IAE’s operating margins are likely to be lower than those of its competitors due to its stated objective of becoming a low cost provider. With nearly 98 million shares of common stock outstanding as of last quarter, this means that investors can expect to see sales of around $0.13 per share if all of the contracts end up materializing.
Assuming net profit margins of around 5% (similar to that of its competitors), this could mean earnings of $0.006 per share. Meanwhile, an industry-standard multiple of around 15x earnings would suggest a share price of $0.09 per share. Whether this price is accurate or not depends on the company’s profitability from its $13 million in pipeline contracts.
Shares of IAE are currently trading at around this price point of $0.09, suggesting a market capitalization of approximately $8.8 million. In the end, prudent investors may want to wait for more information before making an investment decision and leave the movements this week to speculators acting on very little information other than top-line news.
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