On Wednesday, Best Idea Newsletter portfolio holding EDAC Tech (click ticker for report: ) posted excellent third quarter results that showed impressive sales growth and net income expansion. We continue to believe that shares are worth over $20 each, offering investors substantial upside potential.
EDAC’s third-quarter revenue reached $27.5 million, up 26% from the third quarter of last year. Aerospace sales advanced 30%, while industrial segment sales increased 17%. Operating income jumped nearly 70% thanks to roughly 270 basis points of operating margin expansion, to 10.8% of sales. Both of the company’s divisions had strong profit performance. We continue to believe the market is underestimating the tremendous operating leverage inherent to EDAC’s business model and the pace of earnings expansion going forward as its burgeoning backlog is recognized. Net income increased 64%, to $0.29 per share, compared to $0.19 per share in last year’s quarter. EDAC’s backlog of unfulfilled orders totaled $313.7 million, up from $304.3 million at the end of June.
We continue to like the micro-cap aerospace components supplier as a holding in the portfolio of our Best Ideas Newsletter. Demand for aircraft engine parts and ground-based turbine components will remain strong for some time, in our view, and we’re looking forward to EDAC’s ramp up to full production on a number of new programs in the first quarter of next year. Our $23 fair value estimate remains unchanged.