Nortech Systems Incorporated Is Bullish on Strong Earnings & Outlook

Sometimes no news is good news, or maybe weary investors are actually rewarding tech stocks that have strong fundamentals. That seems to be the case with Nortech Systems Incorporated (NASDAQ:NSYS).

The company hasn’t reported any news of consequence since May 10, when it announced outstanding first-quarter results. The report included double-digit revenue growth, a swing to profitability, and positive adjusted earnings.

Over the last five years, Nortech has actually posted the biggest earnings-per-share (EPS) growth rate among semiconductor companies: 175.7%.

On May 12, the company announced a new board member, and that’s pretty much it for recent news.

As you can see in the chart below, investors didn't exactly reward NSYS stock for its fabulous first-quarter earnings report.

Since the middle of June, though, Nortech Systems stock has been on fire, soaring by 64.5% and hitting a record high of $17.39 on July 11. As of this writing, NSYS stock is up by:

• 43% over the last month
• 63% over the last three months
• 57% year-to-date
• 84% year-over-year

Chart courtesy of StockCharts.com

NSYS Stock Overview

Nortech Systems Incorporated is an electronic manufacturing services company that provides "complex interconnect solutions, printed circuit board assemblies, and diagnostic repair and integration services." (Source: “About Nortech,” Nortech Systems Incorporated, last accessed July 15, 2022.)

The company offers a range of value-added engineering, technical, and manufacturing services and support, including project management, designing, testing, prototyping, supply chain management, and post-market services.

Nortech Systems serves the medical device; aerospace and defense; and industrial and commercial equipment markets.

Nortech Systems Incorporated Swings to Profitability

For the first quarter ended March 31, 2022, Nortech announced that its revenue advanced 39% year-over-year to $8.6 million. Its trailing 12-month revenue was up by more than 25% at $124.0 million. (Source: “Nortech Systems Announces 2022 First Quarter Results,” Nortech Systems Incorporated, May 10, 2022.)

The company's net income in the first quarter of 2022 was $138,000, or $0.05 per share, up from a net loss in the first quarter of 2021 of $1.6 million, or $0.58 per share.

Nortech Systems Incorporated's first-quarter 2022 gross profit was $4.0 million, or 13.2%, compared to $1.6 million, or 7.1%, in the first quarter of 2021. The gross profit improvement was primarily due to a combination of higher plant volume, improved operating efficiencies, and price increases.

The company's first-quarter 2022 earnings before interest, taxes, depreciation, and amortization (EBITDA) totaled $600,000, compared to a first-quarter 2021 EBITDA loss of $1.5 million.

Nortech Systems Incorporated's first-quarter 2022 adjusted EBITDA were $640,000, compared to a first-quarter 2021 adjusted EBITDA loss of $1.5 million.

The company's total backlog in the first quarter of 2022 increased by 55% year-over-year to $97.6 million.

Commenting on the first-quarter results, Jay D. Miller, Nortech Systems Incorporated's president and CEO, said, “We were pleased to begin 2022 with continuing positive momentum from last year and we are optimistic about the remainder of this year.” (Source: Ibid.)

He added, “Innovation is a key component of our growth strategy and we are confident that new product technologies will help lay the groundwork for future revenue opportunities that complement our core business.”

Analyst Take

Nortech Systems Incorporated is an excellent under-the-radar tech company that has been reporting wonderful financial results, something sorely lacking in the tech sector right now. In 2021, the company strengthened its balance sheet, restored its revenue growth, improved its gross margins, and swung to profitability.

The momentum in 2021 carried into 2022 with first-quarter results that included significant progress in several key performance areas, including revenue, profitability, price adjustments, operating cash flow, and new product development.

This signals that Nortech Systems stock could keep surging.