I did not think it possible for
American Science & Engineering (Nasdaq:
ASEI) to thrill me again,
as it did earlier this year.
I was wrong.
AS&E reported fiscal second quarter results last
night. Judging from the stock price, the crowd has gone wild
-- and rightly so:
L-3 (NYSE: LLL),
OSI Systems (Nasdaq: OSIS), and even
General Electric (NYSE: GE) regularly
achieve.
Even better, free cash flow for the first half nearly
doubled what AS&E raked in during the first half of
last year -- a cool $14 million. This brings the firm's
trailing-12-month free cash flow up to $39.2 million --
comfortably ahead of what the firm reported as "net income"
under GAAP.
Last but not least, the good times look primed to keep
rolling. Whereas AS&E recorded $61.2 million in sales
during Q2, it booked $90.3 million in new orders. This more
than replenished all work performed during the quarter, and
indeed, increased the backlog of work waiting to be done
(And paid for. And profited from.)
The rapid buildup in backlog suggests we will likely to
accelerating sales in future quarters. Moreover, with backlog
now up above $187 million, more than three quarters' worth of
revenues are "in the bag."
Investors frustrated by the firm's historically lumpy
revenues can therefore take comfort -- while CEO Anthony
Fabiano did drop "the L bomb" a few times during his
post-earnings conference call, he made much less liberal use
of it than in quarters past.
Why? Because AS&E is evolving. Primarily a U.S.
government contractor in years past, AS&E has over time
become a firm that does 45% of its business outside U.S.
borders -- and may soon do the majority of its business
abroad. And while Fabiano cautions that international
contracts can themselves cause lumpiness "due to the longer
selling cycles and the more complex financing requirements,"
diversifying the revenue stream should, over time, help to
smooth out those lumps.
Foolish takeaway
This, in turn, should do good things for the stock.
Investors abhor uncertainty, after all. The less guessing
we are forced to do about AS&E's future, the better for
the stock.
This article was originally published as
American Science Does It Againon
Fool.com
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