“`html
Optex Systems Reports Strong Earnings Growth, Yet Stock Declines
Shares of Optex Systems Holdings, Inc. (OPXS) fell by 5.1% following the release of its earnings report for the fiscal year ending September 29, 2024. For perspective, during the same timeframe, the S&P 500 index posted only a 1% change. Over the past month, Optex’s stock has decreased by 4.4%, contrasting with the S&P 500’s slight drop of 0.4%.
Significant Earnings Improvement
For the fiscal year ending September 29, 2024, Optex Systems announced earnings per share (EPS) of 55 cents, a notable rise from 34 cents in fiscal 2023, marking a 61.8% increase.
Robust Revenue Growth
Total revenues reached $34 million, reflecting a strong increase of 32.5% from $25.7 million the previous fiscal year. This growth was driven largely by heightened customer demand for military products. Specifically, the Optex Richardson segment saw a revenue boost of $6.1 million, while the Applied Optics Center contributed an extra $2.2 million.
Stronger Profit Margins
Gross profit rose 44% year-over-year to $9.5 million, with gross margins climbing by 220 basis points to 28%. Net income experienced a significant jump of 66.5% year-over-year, reaching $3.8 million. Furthermore, operating income surged 73% to $4.8 million, driven by better revenue performance and improved fixed-cost absorption. Adjusted EBITDA, a non-GAAP measure, reflected a 69.7% increase year-over-year, reaching $5.7 million.
Strong Backlog Signals Future Growth
As of September 29, 2024, Optex’s backlog stood at $44.2 million, up 5.7% from $41.8 million at the start of the fiscal year. During the fiscal year, the company secured $36.4 million in new orders, a 5.2% increase from $34.6 million in fiscal 2023. The order book included $23.5 million from the Optex Richardson segment and $12.9 million from the Applied Optics Center segment.
Management’s Positive Outlook
CEO Danny Schoening pointed to the successful acquisition of multi-year contracts for essential products like laser-protected periscopes and M22 binoculars. He attributed the company’s operational efficiencies to these contracts, plus strong supplier support and targeted expansions. Management is hopeful about continuing these positive trends into fiscal 2025.
Understanding the Financials
Revenue growth largely stemmed from increased demand for military optical products, which helped offset a decrease in orders for optical assemblies at the Applied Optics Center. Higher revenue levels also enhanced gross margins through better absorption of fixed costs, although rising general and administrative expenses slightly diluted these gains.
Solid Financial Position
As of September 29, 2024, Optex had $1 million in cash and no outstanding balance on its $3 million credit facility after lowering its liability in the first quarter of fiscal 2025. Working capital improved to $15.1 million, up from $13.5 million on October 1, 2023.
Ongoing Developments and Upgrades
During fiscal 2024, Optex completed a major upgrade to its Applied Optics Center, boosting the segment’s margin from 29.3% in fiscal 2023 to 34.1% in fiscal 2024. Additionally, the company recognized $1 million in intangible assets, enhancing its balance sheet and indicating potential strategic investments.
Future Investment Opportunities
Among the various stocks available, Zacks experts have identified potential winners, with Director of Research Sheraz Mian selecting one with significant growth potential. This company aims at millennial and Gen Z demographics, achieving nearly $1 billion in revenue last quarter alone. Current stock pricing may present an ideal entry point for investors. While not every recommended stock performs exceptionally, past examples such as Nano-X Imaging’s 129.6% surge highlight the possible rewards.
Free: See Our Top Stock And 4 Runners Up
Optex Systems Holdings Inc. (OPXS): Free Stock Analysis Report
Read more about this article on Zacks.com.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
“`
