Arm Yourself with Armor Holdings (AH)
Armor Holdings (AH). Military spending will continue to increase despite which party is in office. No politicians want to appear weak when it comes to the military in the post 9-11 world. As a result, what the military wants, the military gets. This is evident in our Federal budget since 2001. The trend will only continue as long as this country is engaged in the war on terrorism, which could last forever. One of the many companies that has been profiting from increased military spending and will continue to profit is Armor Holdings (AH).
AH is a major supplier of the military. The company manufactures various brands of products for the military as well as law enforcement personnel. From armor systems designed to help protect military vehicles to armored helicopter seating systems, AH is one of the major provider of protective equipment for the military. With safety being a major concern, the government will spend whatever it takes to help reduce injuries and death.
We have no doubt the U.S. military spending should continue to grow and will take a larger share of the overall budget. For this reason, AH opportunity for a sustainable growth is next to guaranteed. Note, we normally do not use the word “guaranteed” often.
Looking over the current valuation, we see opportunity at current level ($64 per share). With P/E to growth ratio of 0.8x and forward P/E of 12x (based on First Call consensus earnings estimates) on the low end of this AH’s historic range, our opinion is the risk/reward for Armor Holdings is compelling. The market has set a low bar and AH should be able to beat this estimate in 2007. We would be a buyer whenever opportunity presents itself.
