I’ve mentioned AeroVironment (AVAV) here before, but I wanted to bring it up again.  The company has a high-current fast-charge battery charging system that’s already being used by Ford Motors and Del Monte for their warehouse forklifts, and by Delta Air Lines for its baggage movers.  But the big prize is the still-tiny–but potentially huge–market for charging electric cars!  If this company’s system becomes the standard, this stock could soar for years!

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Of course, the electric car market is still in its infancy, so investing in this company solely on the possibility that the electric car industry will favor it carries a big risk.  Happily, the company already has a solid growth business; it’s the number one supplier of unarmed aircraft systems (UAS) to the U.S. government.  Its hand-launched drones fly over Iraq, Afghanistan and more, sending back pictures to operators safe on the ground.

And this business is not going away.  Just this month, the U.S. Army signed contracts for $58 million more of the company unmanned aircraft systems (possibly for Afghanistan, where we’re sending thousands more troops and where there’s a relative lack of these drones).  Last year, the U.S. government accounted for 84% of the company’s revenues, and they’ll be spending even more this year.  In a world where everybody seems to be spending less, our federal government is spending more, and that’s a big reason for AeroVironment’s strength.

There’s another company that’s benefiting from the same trend, and its stock was first mentioned (briefly) in last yesterday’s post.  In that post, editor Elyse Andrews reprised the Martin Zweig-influenced screen I sometimes use that finds attractive undervalued growth companies.  Last week, it found only two.  The one that caught my attention was Comtech Telecommunications (CMTL).

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Comtech, you see, is in the same boat as AeroVironment, in that 66% of its revenues come from the U.S. government . . . and business is growing.  The company makes a wide variety of telecommunications transmission and receiving equipment.  It holds the #1 position in the industry in satellite-earth modems, forward error correction technology and over-the-horizon microwave systems.  It makes jamming equipment, troposcatter systems, voice gateways, backhaul cellular traffic systems, movement tracking systems, VOIP systems, antenna systems, mobile systems for homeland security, real-time messaging systems, amplifiers used in counteracting improvised explosive devices (IEDs) and more.

Revenues and earnings have grown every year since 2002.  In the latest quarter, revenues grew 67% to $192 million, while earnings jumped 81% to $1.07 per share.  The after-tax profit margin was 15.7%.  Yet the P/E ratio is just 11.  And the price/sales ratio is 1.7, making it, as the Zweig screen says, a good bargain.

Of course, bargains can always become better bargains.  But the system says this one has far more upside potential than down, and management (which has been buying back the company’s stock recently) will keep the company on the road to growth.

The stock fell from 50 to 37 in the past year, and today, sitting at 38, it looks like an attractive long-term investment.