AeroVironment (NASDAQ: AVAV) experienced a stock increase of over 20% on June 25, 2023, following the release of its stronger-than-expected Q4 fiscal results, which concluded in April. The company reported adjusted earnings of $1.61 per share and sales of $275 million, surpassing consensus estimates of $1.39 and $242 million, respectively.
The demand for drones, particularly from the U.S. Department of Defense, continues to grow due to their cost-effectiveness and quick deployment capabilities. As part of its expansion strategy, AeroVironment acquired BlueHalo for $4.1 billion, enhancing its product offerings, which include the Switchblade and new drones like the P550 and Jump 20-X.
Despite these positive developments, AeroVironment’s valuation at around $235 is viewed as expensive, given that its price-to-sales (P/S) ratio stands at 7.3 compared to the S&P 500’s 3.1, and a price-to-earnings (P/E) ratio of 164.3 versus 26.9 for the benchmark. The company has experienced weak operating performance with an operating margin of 4.4% and a quarterly revenue decline of 10.2%, warranting caution for potential investors.
