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Private Space Stock Ready to Launch


The new trend in private aerospace companies taking up the slack in sending things into space may be the perfect remedy for this comatose mission services firm.


Do you remember when space travel was bold, daring, and exciting, and astronauts were admired much the way mobile app developers are today? It's been a long time.

Loss of novelty, increased awareness that stated risks are for real (resulting from some tragic missions), and ultimately federal budget constraints have pushed all this way to the back burner and diminished the number of launches, something that has hampered progress for Astrotech (ASTC), a provider of launch and mission services.

This is not to say that space is not dead. Satellites serving a variety of purposes (communication, meteorology, etc.) are aloft and still being launched. Indeed, communication satellite firm ORBCOMM (ORBC), is a regular client listing on NASA's launch agenda.

But the level of activity, while sufficient to keep ASTC's revenues above zero, has not been sufficient to prevent considerable slippage in recent years (e.g., from about $100 million a decade ago to $20.1 million in fiscal 2011), not to mention stock-price deterioration (from well above $100, adjusted for a 1-for-10 reverse split, down to the vicinity of $1).

In such situations, the investment case typically emphasizes a company's ability to survive until better days arrive. Astrotech has been doing that, thanks to being able to keep operations cash flow positive more often than not, and a late-2000s balance-sheet restructuring that wound up converting most debt to equity.

It is still too early to announce a happy conclusion to the survival story. But there is now reason to believe the company is a lot closer to the end of its desert passage. That's because it looks like the privatization of space, so to speak, is getting close to becoming an established reality.

The launch of rockets by private-sector companies is not new. What is novel now is the fact that SpaceX, a relatively new Southern California firm, just became the first private-sector firm to launch a craft to the International Space Station, dock with it, and return safely. It is now preparing life-support systems that will enable it to transport astronauts as well as cargo.

The company, cash flow-positive and well funded thanks to NASA and venture capital, could further give a lift to the field if, as rumor suggests, it does an IPO.

In one sense, the good news is not directly relevant to Astrotech. SpaceX is a different company. But the latter is looking like it could be a major catalyst that boosts space, not in the heroic sense of a past generation, but in the commercial sensibilities of the modern era.

Prosperity for Space X would present more business opportunity for Astrotech. So, too, would prosperity for SpaceX rivals. And Wall Street may be starting to think this way. Astrotech shares have performed well in recent months, and the price-to-sales of 0.92, while by no means lofty, is higher than we've seen for some other deep-value low-priced plays, which is noteworthy given Astrotech's decade-long slide.

In terms of space-launch support, Astrotech is the dominant entrant thanks to the breadth of its services (communications support, safety inspections, rocket-motor preparation, clean room maintenance, staging and transportation of liquid propellants, ordnance handling, etc.) and its presence at multiple launch facilities.

One commercial rival provides a narrower range of services at fewer facilities, and NASA processes only a small number of government satellites and no commercial craft. So there is good reason to expect Astrotech to benefit from an increased number of launches.

Still, this is not a no brainer. Astrotech has a bit of the boom-or-bust quality to it, but considering the risks attending nowadays even on shares of conventional business, I think this one is worth a "go." Astrotech is a speculative Buy.

Editor's Note: This article was written by Marc Gerstein of Forbes Low-Priced Stock Report.

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