Mercury Stock Has Strong Growth Catalysts
Global tensions and threats are on the rise. And this has led to a visible trend: increasing defense budgets.
The world over, governments have been becoming more interested in better, more advanced weapons. As relations among countries get more complex, this trend will become stronger.
Though we pray for a more peaceful world, spending on advanced weapons will keep on increasing. Hence, defense stocks will continue to attract investors looking for high growth.
Mercury Systems Inc (NASDAQ:MRCY) is one such player in the growing U.S. defense industry. The company builds advanced defense electronics.
The defense industry’s needs are changing with technological advances, and Mercury Systems is positioning itself to benefit from these changes.
The company’s clients are top defense contractors. Mercury supports their critical defense and intelligence programs. The growing business is leading to higher MRCY stock prices.
In order to boost its position in the industry, Mercury acquired Themis Computer, Inc. last February. Themis adds to Mercury’s edge in the attractive Command, Control, Communications, Computers, and Intelligence (C4I) market.
The use of C4I systems in advanced electronic warfare is growing rapidly. These systems have become critical in enhancing U.S. defense efforts.
From global positioning systems (GPS) to unmanned sea vehicles and missile defense systems, technology is transforming every area of defense.
A recent report by the Stockholm International Peace Research Institute (SIPRI) says that global military spending in 2017 amounted to $1.7 trillion. China, India, and Saudi Arabia all increased their defense spending that year, but the U.S. continued to have the highest military expenditure in the world. (Source: “Global military spending remains high at $1.7 trillion,” Stockholm International Peace Research Institute, May 2, 2018.)
The SIPRI report states that, in 2018, the U.S. military will spend more to support the modernization of its conventional and nuclear weapons. This means it should be another good year for MRCY stock.
Last month, the company reported its third-quarter results. The quarterly revenue reached $116.3 million, as compared to $107.3 million in the third quarter of last year. (Source: “Mercury Systems Reports Third Quarter Results,” Mercury Systems, May 11, 2018.)
The company’s cash flows, however, have gone down because Mercury is continuously increasing its investment in the business. By March 31, 2019, orders worth $321.0 million will be shipped by the company, out of a total current order backlog of about $429.3 million.
Business has been good, and this has led to the Mercury stock price climbing more than 360% over the last five years.
The following MRCY stock chart shows this impressive run.
Chart courtesy of StockCharts.com
Mercury Systems has an impressive list of clients, including Harris Corporation (NYSE:HRS), Lockheed Martin Corporation (NYSE:LMT), Northrop Grumman Corporation (NYSE:NOC), and Raytheon Company (NYSE:RTN).
Investors who want to profit from the rising global uncertainties might want to consider Mercury stock. With a proven management team, Mercury Systems Inc is well positioned to gain from the present trends in the defense industry.
Given the continuous rise in military expenditures in the U.S., the MRCY stock price will likely continue its upward trajectory.