Teaser: $OPXS Optex Systems Holdings, Inc. Cheap microcap.

Originally posted on reddit

https://www.reddit.com/r/MicrocapVillage/comments/n9ogvy/teaser_opxs_optex_systems_holdings_inc_cheap/

Disclosure: I do not hold a position in OPXS.

Name: Optex Systems Holdings (OTC)

Ticker: OPXS

As of March 28, 2021 10Q:

Market Cap: $13MM

Cash: $4MM

Current Assets: $15MM

Total Liabilities: $7.3MM

Net Cash: $4MM

Enterprise Value: $9MM

Revenues: Stabilized at $20-24MM. Growth?

EBIT = $3MM normalized.

EV/EBIT = 9/3 = 3

Business:

Optex Systems Holdings, Inc. (the “Company”) manufactures optical sighting systems and assemblies for the U.S. Department of Defense, foreign military applications and commercial markets. Its products are installed on a variety of U.S. military land vehicles, such as the Abrams and Bradley fighting vehicles, light armored and advanced security vehicles, and have been selected for installation on the Stryker family of vehicles. The Company also manufactures and delivers numerous periscope configurations, rifle and surveillance sights and night vision optical assemblies. Optex Systems Holdings’ products consist primarily of build to customer print products that are delivered both directly to the military and to other defense prime contractors or commercial customers. The Company’s consolidated revenues are derived from the U.S. government, 25%, three major U.S. defense contractors, 31%, 13% and 9%, one commercial customer 5%, and all other customers, 17%. Approximately 89% of the total company revenue is generated from domestic customers and 11% is derived from foreign customers.

Gross margins: 23% normalized (improving.)

Operating margins: 10% normalized.

Comments:

I am really surprised that their gross margins are gradually improving. Maybe they are selling different products?

Risk:

There is government risk in case government doesn't buy.

Remember, this is only a quik pick, no deep dive.

I might go long, if I find the opportunity compelling. It's cheap. Gotta read the latest 10Q and latest 10K.

How do I know this name:

Gate City Capital Management is long. It's a small hedge fund with AUM $20MM that invests in microcap names with concentrated holdings.