Frequency Electronics (FEIM) AI Stock Analysis

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Frequency Electronics

(NASDAQ:FEIM)

77Outperform

Frequency Electronics presents a compelling investment case with strong financial performance and positive earnings call sentiment. The company's low leverage, robust profit growth, and strategic positioning in high-growth markets are significant strengths. The stock's technical indicators suggest upward momentum, though caution is advised due to an overbought stochastic signal. Attractive valuation metrics, including a low P/E ratio and high dividend yield, further enhance the stock's appeal.

Frequency Electronics (FEIM) vs. S&P 500 (SPY)

Market Cap

$145.73M

Dividend Yield6.64%

Average Volume (3M)57.95K

Price to Earnings (P/E)6.3

Beta (1Y)0.46

Revenue Growth24.10%

EPS Growth603.04%

CountryUS

Employees200

SectorTechnology

Sector Strength40

IndustryCommunication Equipment

Share Statistics

EPS (TTM)2.41

Shares Outstanding9,676,513

10 Day Avg. Volume45,935

30 Day Avg. Volume57,946

Financial Highlights & Ratios

PEG Ratio0.01

Price to Book (P/B)N/A

Price to Sales (P/S)4.63

Price to Cash Flow (P/CF)-10.90

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price TargetN/A

Price Target UpsideN/A

Rating ConsensusN/A

Number of Analyst Covering0

Frequency Electronics Business Overview & Revenue Model

Company DescriptionFrequency Electronics, Inc. (FEIM) is a leading provider in the precision time and frequency generation technology sector. The company specializes in developing and manufacturing advanced timing, frequency control, and synchronization products for various markets, including space, defense, commercial communications, and other industrial applications. Their core products include precision oscillators, frequency synthesizers, and time and frequency systems that are critical for ensuring the accuracy and reliability of communications and data transfer systems.

How the Company Makes MoneyFrequency Electronics makes money primarily through the sale of its high-precision timing and frequency control products. The company's revenue model is based on manufacturing and supplying these specialized products to government and commercial entities that require precise time and frequency solutions, such as aerospace and defense contractors, telecommunication companies, and satellite operators. Key revenue streams include contracts with government agencies, such as the Department of Defense, as well as partnerships with major aerospace and defense firms. Additionally, Frequency Electronics generates income through research and development services, often funded by government grants or contracts, which further contribute to their earnings.

Frequency Electronics Financial Statement Overview

Summary

Frequency Electronics demonstrates strong financial health with impressive revenue and profit growth. The balance sheet indicates low leverage and a solid equity base, contributing to financial stability. While cash flow metrics show positive growth, there is room to improve cash conversion efficiency. The company is well-positioned in the Hardware & Equipment industry, with a promising trajectory.

Income Statement

Very Positive

Frequency Electronics has shown a strong performance in the TTM, with a significant increase in total revenue by 18.32% compared to the previous year. The gross profit margin improved to 44.15%, and the net profit margin rose substantially to 35.34%, indicating enhanced profitability. The EBIT and EBITDA margins also showed impressive growth, demonstrating effective cost management and operational efficiency.

Balance Sheet

Positive

The company's balance sheet is stable, with a favorable debt-to-equity ratio of 0.10, reflecting low leverage and a strong equity position. The equity ratio of 59.98% suggests a solid financial foundation. However, the return on equity (ROE) is quite high at 44.59%, driven by the substantial net income in the TTM, which may not be sustainable.

Cash Flow

Positive

Frequency Electronics exhibits robust cash flow dynamics, with a free cash flow growth rate of 25.26%, indicating efficient cash management. The operating cash flow to net income ratio of 0.27 is moderate, suggesting a need for improved conversion of earnings into cash. The free cash flow to net income ratio of 0.23 further highlights this area for potential enhancement.

TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
65.40M	55.27M	40.78M	48.30M	54.25M	41.51M
	Gross Profit
28.88M	18.58M	7.85M	8.60M	16.92M	5.79M
	EBIT
10.95M	5.02M	-4.67M	-8.04M	-958.00K	-10.89M
	EBITDA
11.52M	7.70M	-2.88M	-5.58M	3.62M	-8.13M
	Net Income Common Stockholders
23.11M	5.59M	-5.50M	-8.66M	680.00K	-9.99M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
19.00M	18.32M	12.05M	21.52M	20.12M	14.38M
	Total Assets
84.50M	83.25M	74.50M	85.88M	86.02M	91.31M
	Total Debt
600.00K	6.18M	7.64M	9.10M	10.08M	11.31M
	Net Debt
-6.80M	-12.13M	15.27M	-2.46M	274.00K	7.50M
	Total Liabilities
18.50M	43.44M	41.61M	39.19M	30.61M	37.04M
	Stockholders Equity
66.00M	39.82M	32.89M	46.69M	55.41M	54.27M
Cash Flow		Free Cash Flow
5.39M	7.22M	257.00K	2.18M	10.92M	-2.89M
	Operating Cash Flow
6.21M	8.71M	1.18M	4.04M	12.16M	-1.41M
	Investing Cash Flow
-2.00M	-1.49M	8.67M	-2.28M	-1.19M	-3.43M
	Financing Cash Flow
-9.94M	0.00	-9.35M	0.00	-4.96M	4.96M

Frequency Electronics Technical Analysis

Technical Analysis Sentiment

Negative

Last Price15.50

Price Trends

50DMA

16.00

Negative

100DMA

16.00

Negative

200DMA

13.87

Positive

Market Momentum

MACD

-0.05

Negative

RSI

46.24

Neutral

STOCH

14.70

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FEIM, the sentiment is Negative. The current price of 15.5 is below the 20-day moving average (MA) of 15.53, below the 50-day MA of 16.00, and above the 200-day MA of 13.87, indicating a neutral trend. The MACD of -0.05 indicates Negative momentum. The RSI at 46.24 is Neutral, neither overbought nor oversold. The STOCH value of 14.70 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for FEIM.

Frequency Electronics Risk Analysis

Frequency Electronics disclosed 18 risk factors in its most recent earnings report. Frequency Electronics reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Frequency Electronics Peers Comparison

Overall Rating

UnderperformOutperform

Sector (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
FEIM	77 Outperform	$145.73M	6.26	52.23%	6.64%	24.10%	603.04%
LHX	76 Outperform	$37.93B	25.65	7.85%	2.34%	9.82%	22.33%
IRDM	70 Outperform	$2.53B	24.73	15.40%	2.40%	5.05%	632.38%
KTOS	59 Neutral	$4.25B	264.92	1.40%	―	9.57%	―
AVAV	58 Neutral	$3.15B	96.99	3.94%	―	5.21%	―
Sector *	57 Neutral	$18.45B	9.41	-13.97%	2.74%	5.04%	-23.56%
VSAT	54 Neutral	$1.08B	―	-8.49%	―	19.02%	76.67%

* Technology Sector Average

Performance Comparison

FEIM

Frequency Electronics

15.50

6.11

65.07%

AVAV

AeroVironment

121.03

-28.82

-19.23%

LHX

L3Harris Technologies

200.75

-1.25

-0.62%

IRDM

Iridium Communications

22.65

-2.71

-10.69%

KTOS

Kratos Defense

28.92

10.59

57.77%

VSAT

ViaSat

7.70

-9.98

-56.45%

Frequency Electronics Earnings Call Summary

Earnings Call Date: Mar 13, 2025 | % Change Since: 10.24% | Next Earnings Date: Jul 17, 2025

Earnings Call Sentiment Positive

The earnings call reflected a positive sentiment with record-breaking revenue and significant net income growth, driven by strong performance in space programs. Despite some challenges such as a decline in non-space government revenue and a decrease in the backlog, the company's strategic positioning in high-growth markets like proliferated satellites and quantum sensing indicates a positive trajectory.

Highlights

Record Revenue Growth

Consolidated revenue for the nine months ended January 31, 2025, was $49.8 million, a significant increase from $39.7 million for the same period of the prior fiscal year. This marks the highest revenue quarter for the company in 10 years.

Increase in Operating Income

Operating income for the nine months ending January 31, 2025, was $8.5 million compared to $2.5 million in the prior year, driven by the completion of major milestones in a large space program.

Strong Net Income Growth

Consolidated net income for the nine months ending January 31, 2025, was $20.5 million or $2.18 per share compared to $3 million or $0.32 per share in the previous fiscal year.

Significant Tax Benefit

The company recorded an income tax benefit of $11.6 million for the nine months ending January 31, 2025, including a discrete tax benefit of $11.9 million.

Growing Strategic Importance

The company has increased its strategic importance in larger addressable markets such as proliferated satellites and quantum sensing, which is expected to drive future revenue and profitability.

Lowlights

Decline in Non-Space Government Revenue

Revenues from non-space U.S. government and DoD customers decreased to $19.5 million from $21.1 million in the same period of the prior fiscal year.

Decrease in Fully-Funded Backlog

The fully-funded backlog at the end of January 2025 was approximately $73 million, down from approximately $78 million at the previous fiscal year end.

Cash Position Decrease

Cash decreased by approximately $12.8 million since year-end, with the dividend paid in Q2 accounting for approximately $9.6 million of this decrease.

Company Guidance

During the Frequency Electronics' Third Quarter Fiscal 2025 Earnings Release Conference Call, CEO Thomas McClelland highlighted significant growth in revenue, gross margin, and operating income for the quarter and year-to-date, marking the highest revenue quarter for the company in a decade. Revenue from commercial and U.S. government satellite programs rose to $28.8 million, accounting for 58% of consolidated revenue, while non-space U.S. government and DoD customer revenue decreased to $19.5 million, representing 39% of consolidated revenue. R&D expenses increased to $4.5 million, reflecting a focus on product modernization. Operating income improved to $8.5 million, up from $2.5 million in the previous year, driven by successful completion of large space programs. The company reported a consolidated net income of $20.5 million or $2.18 per share, and a strong balance sheet with a working capital of $27 million and a current ratio of 2.2:1. The fully-funded backlog stood at $73 million. CFO Steve Bernstein noted a decrease in contract liabilities by $7.4 million quarter-over-quarter, while emphasizing the company's debt-free status and adequate liquidity to meet future operational needs.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.