3 Powerful Defense Stocks Set to Profit
By The Penny Sleuth Editorial Team

A few weeks ago, we introduced our readers to a small-cap defense company. Before issuing the recommendations, we wanted to finish our research and wanted to wait until it posted its 2007 quarterly results. Well, the wait is now over…

This small-cap defense company produces decision-making tools for government agencies and large corporations that allow them to process data so that they can be used in effective decision-making. Whether it’s multidimensional battlegrounds or complex sales campaigns, this company’s products and systems help customers take it all in.

And because of the similarities between warfare and business, this small-cap defense company has a very diverse customer base. Their customers include the U.S. military, as well as contractors like Lockheed Martin (LMT: NYSE) and Northrop Grumman (NOC: NYSE) as well as Sony (SNE: NYSE) and 7-Eleven.

The defense stock initially got our attention because it looked cheap and insiders were piling in….This defense stock is way too illiquid to give away to just anyone, so to get the name of the stock, all we ask that you become a free member of the Penny

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But before we tell you all the benefits of becoming a Penny Sleuth free subscriber, we want to tell you more about this unique investment opportunity in this small-cap defense stock…

As far as valuation goes, the defense stock still appears cheap today. It’s selling for just under 2 times book, whereas over the last five years, it typically has traded for just under 6 times book. It’s trading at less than 1 times sales, which is almost an objectively cheap level for a defense company like this, and it is trading below its five-year cash flow multiple.

As of late June 2006, all the way through the end of the year, insiders have been exercising options…and holding onto the stock. And this is pretty telling, considering 2Q07 earnings yet again marked the defense company’s propensity to have somewhat erratic results and unprofitable quarters:

For 2Q of this year, the company’s revenue growth year over year was up about $6.8 million, with gross margin improvement as well. What hurt the quarter and made earnings flat at $0.00 per share were a bad debt charge and an accounting adjustment. Both are nonoperational and should not be a consistent blight on earnings.

The company’s quarterly revenue has traditionally been rather lumpy, and management is making changes to smooth that out, while at the same time focusing on higher-margin business. The outlook is for 2007 sales to be $75 million for the full year, and we get the sense that management is also seeking more consistent profitability.

Which leads us to our opportunity…

To get the name of this stock… and all the urgent details, sign up for Penny Sleuth today. Plus, you’ll get penetrating coverage of the small cap and penny stock universe.

The first defense stock is a 155-year old manufacturer with a very compelling investment story. Recent innovations helped the defense company achieve a 20% sales growth – in this is in an industry that grows is the low single digits!

On top of that, this defense company has just introduced premiere-grade law enforcement gun that has entered the $1 billion U.S. rifle market… and it’s won even more government contracts.

That’s only part of the story… you’ll get all the details if you sign up for your Free Report.

The second defense stock has already posted a 23% gains since I introduced it to my readers… It’s been on the upswing for the past several trading sessions, despite the battle on Capitol Hill over defense spending.  Find out why this defense stock continues to rise! Sign up for Penny Sleuth today and access your Free Report!

Until next time,
The Penny Sleuth Editorial Team

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