Looking to invest in space aside from Virgin Galactic? Here are MyWallSt’s top 3 space stocks to get you started.
Dec. 10, 2020
Over the past few years, interest in the space industry has grown as new and exciting technology fuels both the rockets and human potential in Space. Wall Street predicts this will be the next multi-trillion dollar industry within the next 2 decades and there are already a number of space stocks known to the investing public: SpaceX, Virgin Galactic (NYSE: SPCE), Boeing (NYSE: BA) as well as NASA and the recently formed U.S. Space Force — no relation to Netflix’s (NASDAQ: NFLX) recent show starring Steve Carrell.
Unfortunately for investors, SpaceX is privately owned by Tesla (NASDAQ: TSLA) CEO Elon Musk and Boeing has had its share of turbulence in recent years. Virgin Galactic has had its ups and downs (quite literally) over the past few years. Although experiencing an ‘up’ right now, Virgin Galactic is still not profitable and has been delaying commercial space flight for over a decade. There is no doubt it will eventually get there — especially with the new Space Act agreement — but in the meantime, here are three other space stocks that will continue to profit in this soaring industry growth.
MyWallSt’s Top 3 Space Stocks
1. Aerojet Rocketdyne
With a spacey name like Aerojet Rocketdyne (NYSE: AJRD), it is no wonder that it is one of the most essential names in the business. This is a company that has been around longer than you or I — with over a century of experience. It built the main engines for the Space Shuttle and still works with NASA today on a number of projects including a super rocket as well as testing green fuels.
The company itself is rather small with about 5,000 staff members total and a current market cap of around $3 billion. Despite this, if the company were to disappear, U.S. space operations would be crippled. Aerojet and Northrop Grumman (NYSE: NOC) are the only two U.S. companies that specialize in missile and rocket engines as well as space-system propulsion.
Aerojet is known to be a slow-growth stock, but over the past 5 years, its net income has grown 47%. Last year alone saw $141 million in net earnings with $220 million in free cash flow, this is an ideal company for a patient, low-risk investor, particularly as it has no debt and a 22% ROE which is higher than the industry average of 13%. Aerojet does not pay a dividend; instead, its profits are reinvested back into the business powering its earnings growth.
2. Northrop Grumman
Northrop Grumman is a diversified tech company that specializes in aerospace, innovation and defense systems. It is best known as a defense giant, producing advanced multi-mission radars which are in high demand at a time with several international cross-border disputes. In the space sector it continues with surveillance-ware building satellites and currently developing NASA’s new deep space telescope.
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Despite showing bearish tendencies Northrop is one to watch. In the past year, its stock dropped 12%, which in comparison to the industry as a whole losing 30.8%, is not too bad. Its EPS numbers are not too shabby either, sitting on an average of $5.30 per quarter.
This is not a company that will go away any time soon. Considered to be an ‘old space’ stock, it uses its experience in other sectors, its contracts with the U.S. military, and its collaborative projects with the likes of NASA, Lockheed Martin (NYSE: LMT), and Blue Origin to stay innovative and relevant in a fast-growing industry.
3. Honeywell International
Honeywell‘s (NYSE: HON) stock has climbed more than 30% in the past few months thanks in some part to working with the Space Force, which will mean plenty of future contract work and development. Its experience with thermal control and manned space flights should not be dismissed as it has worked with NASA since the very beginning.
Potential investors in this stock could see their money well protected from market volatility as Honeywell displays several characteristics of being an ‘economic moat’. With a 16.2% ratio of cash flow to sales and a 5-year average of 29.2% ROE. This is a company where I would happily put my money.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.