Axsys Technologies: A tale of two analysts

A year ago, Axsys Technologies Inc. (Nasdaq:AXYS), a specialty supplier of precision optics for military surveillance gear, took off like a surveillance helicopter headed for Iraqi air space. The question now is whether this pricey stock will once again beat Street estimates and continue its climb, or miss expectations and see a serious correction.

Axsys had been trading between about $20 and $25 for several years, then the stock soared 178% to close at about $50 on April 18, from a closing price of $18.38 a year earlier, resisting any threats of recession. The stock closed Friday at $50.15.

It has not yet failed to please. In an earnings preview report released April 17, analyst Stephen E. Levenson at Stifel Nicolaus wrote that he’s anticipating an announcement of increased demand for the company’s thermal optics devices, and reiterated his “buy” rating and target price of $54.

Elsewhere on the Street, analyst Michael Ciarmoli at Boenning & Scattergood, maintains his neutral “market perform” rating, keeping an eye out for any stumble in coming quarters. He said the stock’s multiple of price to operating earnings is already 50% higher than that of its aerospace and defense peers. Its nearest competitor, Flir Systems Inc. (Nasdaq:FLIR), is a much larger company ($4 billion market cap compared to $556 million for Axsys) with a broader product line, higher operating profit margins (about 50% compared to Axsys’ 30%), and the same growth rate, about 20% on the top line. Both stocks are trading at a P/E of 33. “I like everything about this company except the valuation,” Ciarmoli says. Most other analysts also have a “neutral” or “hold” rating.

Axsys makes infrared and optical lenses, motion control assemblies and optical scanning assemblies, which it sells to defense contractors who use them to create high-power surveillance systems for the military and law enforcement . . .

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