Innovative Solutions And Support (ISSC) AI Stock Analysis

• Market Cap: $418.15M
• Dividend Yield: N/A
• Average Volume (3M): 496.21K
• Price to Earnings (P/E): 22.9
• Beta (1Y): 1.37
• Revenue Growth: 78.60%
• EPS Growth: 121.71%
• Country: US
• Employees: 133
• Sector: Industrials
• Sector Strength: 72
• Industry: Aerospace & Defense
• EPS (TTM): 0.25
• Shares Outstanding: 17,778,343
• 10 Day Avg. Volume: 476,430
• 30 Day Avg. Volume: 496,210
• PEG Ratio: 0.11
• Price to Book (P/B): 3.40
• Price to Sales (P/S): 2.60
• P/FCF Ratio: 32.32
• Enterprise Value/Market Cap: 1.04
• Enterprise Value/Revenue: 4.82
• Enterprise Value/Gross Profit: 9.48
• Enterprise Value/Ebitda: 14.43
• 1Y Price Target: $25.50
• Price Target Upside: 8.23% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 2
• EPS Forecast (FY): 0.71
• Revenue Forecast (FY): $87.02M

• Rating: 78 Outperform
• Price Target: $28.00 ▲(18.85% Upside)
• Action: Reiterated Date: 02/14/26
• Date: Action: Reiterated 02/14/26

ISSC’s score is driven primarily by strong underlying financial performance (healthy margins, ROE, improving leverage, and rising cash flows). Technicals are supportive with a clear uptrend and positive momentum signals. Valuation is acceptable but not cheap at ~19.7x earnings and lacks dividend support, while the earnings call was broadly constructive but tempered by flat full-year organic revenue guidance and expected margin normalization.

Positive Factors

High margins & ROE

Sustained high gross (~50.8%) and net (~21%) margins with ROE ~31% indicate durable profitability and pricing power. This supports internal reinvestment, funds strategic R&D and product development, and creates a margin buffer that helps the company sustain cash generation through industry cycles.

Improving leverage & liquidity

Material improvement in leverage and sizable available liquidity (~$83.3M including credit) provide financial flexibility. Lower debt ratios (D/E ~0.34) reduce refinancing risk, fund capex/insourcing initiatives and give optionality for disciplined M&A or cushioning through operational transitions.

Backlog & order visibility

A ~$75M backlog with healthy new orders provides multi-quarter revenue visibility and production planning clarity. Stable contract backlog reduces near-term top-line volatility, supports predictable revenue conversion, and underpins longer-term operational capacity and margin optimization plans.

Negative Factors

Flat organic revenue guidance

Guidance for essentially flat organic revenue for FY2026 signals uncertainty in sustainable top-line growth despite a strong quarter. Prolonged flat growth can delay scale benefits, force greater reliance on margin expansion or M&A to meet medium-term revenue targets, and limits revenue-driven return improvements.

Margin variability from mix

Notable quarterly swings (Q1 54.5% vs guidance mid-40s) indicate margin sensitivity to product mix and timing. Persistent variability complicates planning, weakens predictability of free cash flow conversion, and makes meeting long-term adjusted EBITDA margin targets dependent on successful mix shift and execution over multiple quarters.

Execution & third-party timing risk

Dependence on third-party suppliers and integration timing has produced measurable revenue headwinds and schedule slips. Such execution risk can delay insourcing benefits, postpone margin improvements, and create stop/start revenue recognition that undermines consistent growth and operational predictability over the medium term.

Innovative Solutions And Support Business Overview & Revenue Model

Company Description

Innovative Solutions and Support, Inc., a systems integrator, designs, develops, manufactures, sells, and services flight guidance, autothrottle, and cockpit display systems in the United States and internationally. It offers flat panel display systems that replicate the display of analog or digital displays on one screen and replace existing displays in legacy aircraft, as well as used for security monitoring on-board aircraft and as tactical workstations on military aircraft; and flight management systems that complement the flat panel display system upgrade for commercial air transport aircraft. The company also provides integrated standby units, which incorporate the measurement and display of attitude, altitude, airspeed, and navigation data into a single standby/backup navigation instrument for military, commercial air transport, and corporate/general aviation applications. In addition, it offers digital air data computers that calculate various air data parameters, such as altitude, airspeed, vertical speed, angle of attack, and other information; integrated air data computers and display units, which calculate and convey air data information; altitude displays that convey aircraft altitude measurements; airspeed displays that convey various airspeed measurements; and altitude alerters. Further, the company offers the engine and fuel displays that convey information related to fuel and oil levels, and engine activity, including oil and hydraulic pressure and temperature; integrated global navigation systems; ThrustSense, a full regime autothrottle; and utility management systems. It serves commercial air transport carriers and corporate/general aviation companies, the Department of Defense and its commercial contractors, aircraft operators, aircraft modification centers, government agencies, and foreign militaries, as well as original equipment manufacturers. Innovative Solutions and Support, Inc. was incorporated in 1988 and is based in Exton, Pennsylvania.

How the Company Makes Money

ISSC generates revenue through multiple streams, primarily by selling software licenses for its proprietary solutions, which include customizable flight operation and maintenance management software. In addition to software sales, the company offers ongoing technical support and maintenance contracts, providing a steady stream of recurring revenue. ISSC also partners with various aviation organizations and regulatory bodies to deliver tailored solutions, which can lead to additional project-based income. Furthermore, the company participates in government contracts and grants within the aerospace sector, contributing to its overall earnings.

Innovative Solutions And Support Financial Statement Overview

Summary

Strong profitability and returns (TTM net margin ~21%, ROE ~31%) with improving leverage (debt-to-equity ~0.34) and solid cash generation (TTM FCF $12.3M, +80.5%). Key risks are margin variability over time and imperfect cash conversion (FCF ~62% of net income).

Income Statement

ISSC shows strong profitability and improving scale. Revenue rose to $90.1M in TTM (Trailing-Twelve-Months) with solid growth (+6.9%), and profitability is healthy with ~50.8% gross margin and ~21.0% net margin in TTM. Operating profit is also strong (EBIT margin ~22.6% and EBITDA margin ~32.2%). A key watch-out is margin variability over time (gross margin was higher in earlier years), indicating potential mix or pricing/cost swings even as earnings trend meaningfully upward versus prior annual periods.

Balance Sheet

The balance sheet looks sound with moderate leverage and strong returns. In TTM (Trailing-Twelve-Months), debt-to-equity is ~0.34 (down from ~0.60 in 2024), suggesting improving balance-sheet flexibility. Profitability on equity is strong (ROE ~31.1% in TTM), consistent with the company’s improved earnings power. The main risk is that total debt is still material in absolute terms (~$23.5M TTM), so maintaining current profitability is important to keep leverage trending favorable.

Cash Flow

Cash generation is good and improving, but conversion is not perfect. TTM (Trailing-Twelve-Months) operating cash flow is $19.6M and free cash flow is $12.3M, with exceptionally strong free cash flow growth (+80.5%). However, operating cash flow is roughly in line with net income (about 1.0x), and free cash flow covers only ~62% of net income in TTM—suggesting working-capital needs or reinvestment are limiting how much accounting profit turns into residual cash in the latest period.

Breakdown	TTM	Sep 2025	Sep 2024	Sep 2023	Sep 2022	Sep 2021
Income Statement
Total Revenue	90.14M	84.30M	47.20M	34.81M	27.74M	23.04M
Gross Profit	45.79M	40.51M	25.91M	21.31M	16.67M	12.78M
EBITDA	30.08M	25.41M	11.89M	8.73M	7.71M	4.33M
Net Income	18.95M	15.63M	7.00M	6.03M	5.52M	5.06M
Balance Sheet
Total Assets	109.94M	103.36M	82.38M	62.96M	34.71M	27.09M
Cash, Cash Equivalents and Short-Term Investments	8.29M	2.69M	538.98K	3.10M	17.25M	8.27M
Total Debt	23.53M	24.14M	28.03M	19.51M	28.68K	42.98K
Total Liabilities	41.19M	38.76M	35.74M	24.32M	3.96M	2.50M
Stockholders Equity	68.74M	64.60M	46.64M	38.64M	30.75M	24.59M
Cash Flow
Free Cash Flow	12.26M	6.79M	5.14M	1.80M	5.93M	4.25M
Operating Cash Flow	19.62M	13.30M	5.80M	2.10M	6.09M	4.59M
Investing Cash Flow	-7.36M	-6.51M	-16.88M	-36.16M	2.59M	-340.68K
Financing Cash Flow	-4.58M	-4.64M	8.53M	19.91M	301.15K	-19.77M

Innovative Solutions And Support Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 23.56
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ISSC, the sentiment is Positive. The current price of 23.56 is above the 20-day moving average (MA) of 20.55, above the 50-day MA of 18.95, and above the 200-day MA of 13.72, indicating a bullish trend. The MACD of 1.25 indicates Negative momentum. The RSI at 62.59 is Neutral, neither overbought nor oversold. The STOCH value of 89.35 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ISSC.

Innovative Solutions And Support Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ISSC	78 Outperform	$418.15M	22.89	32.53%	―	78.60%	121.71%
NPK	70 Outperform	$901.57M	23.14	10.69%	0.92%	34.75%	14.31%
DCO	65 Neutral	$1.85B	-54.00	-5.27%	―	3.16%	-213.56%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
MRCY	55 Neutral	$5.20B	-173.88	-2.08%	―	8.63%	72.72%
EVEX	49 Neutral	$1.07B	-4.79	-115.63%	―	―	-33.69%
EVTL	45 Neutral	$442.39M	-0.50	―	―	―	―