PSP is a manufacturer of body armor and related products for military and law enforcement use. Recently they have branched into some other products including ballistic blankets.
Trading at .90/share CDN
The last 4 quarters showed EPS of
The weaker results in the most recent quarter on the bottom line were a result of startup expenses in the US operations (400k) and the company paying meaningful taxes for the first time. If both of those factors were removed they would have shown a 4th quarter of continued bottom line improvement and would have earned roughly .05/share which would have been a trailing 12 month EPS of roughly .14.
This company has been throwing off huge amounts of operating cash flow over the last year
Over the past 12 months they have thrown off more than 6 million in operating cash flow. With a market cap of roughly 18 million CDN that means they are trading at 3 times their trailing 12 month operating cash flow.
The company maintains a solid balance sheet with a book value of .50 a share.
This is one of the huge strengths of this company. The company president is David Scott former CEO of general dynamics canada. He has brought additional high level executives from GD on board with him.
In addition to their pedigree these managers are shareholder friendly having created little dilution as of late and taking relatively modest salaries.
They also have a penchant for smart business moves. They used some of that recent operating cash flow to pay of a company loan bearing interest of 18%. They also opened a facility in Dover Tennessee which will allow them to sell armor products to the US military (you must have a us presence for orders over 100k).
The Dover facility was acquired on very beneficial terms and is located in a place that is economically depressed but with a skilled labor force from the company that previously occupied the facility.
This is typical of the companies execution in that they shrewdly added a facility on the cheap that taps an enormous market for them in the US with a ready labor force.
PSP is the dominant player in the body armor market in Canada. They have long term contracts with the DND there that should provide a stable revenue base. In addition they have made inroads in the US market with running contracts in PA and MS. The investments here in marketing should pay off and will only add to the bottom line going forward.
They expect millions of additional annual revenue from the ballistic blanket products which should add to the topline as well.
Finally the wildcard is US military orders. The company makes an outstanding product (something I have verified with their distributors). They also have the high level executives from GD that should open alot of doors within the military for US contracts. My expectation is you will see a significant US military order in 2007. That is after all why the US facility was opened.
On top of that larger political factors are not going away. The US is now possibly planning higher troop levels in Iraq and body armor is in demand as it is being worn out in theater.
In the end this is a fast growing profitable company in a recession-proof industry with killer management that is trading at a level that is dirt cheap by almost any measure.