Is it the Best time to Sell Astronics Corporation?

Although, Astronics Corporation (NASDAQ:ATRO) generated lower than expected results for the latest quarter and the company has reduced its full-year outlook, its stock has been growing at a rapid pace over the last three months. ATRO stock gained more than 32% in the last three months and the stock is up close to 17% in the last twelve months. Astronics has a market capitalization of $1.1 billion, while the stock was trading in the range of $24.35-$44.03 in the last 52-weeks.

After a sharp rally in Astronics share price, investors are questioning whether the rally is offering a selling opportunity?

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The company’s shares are moving on the back of its strong future fundamentals. It has recently completed Telefonix acquisition, which provides advanced connectivity and in-flight entertainment equipment. This acquisition will strengthen the company’s aerospace product portfolio. Its aerospace portfolio accounts for almost 90% of total revenues and the company expects a strong demand for its aerospace products in FY2018.

Recently, Astronics won contracts from six major North American airlines to set up its EmPOWER in-seat power systems on almost 1,400 regional jet aircraft. The company’s selection for these major fleet upgrades represents the strength of its product portfolio and solidifies its position in the aerospace industry.

Moreover, the company expects its organic revenue growth to increase by 10%in FY2018, compared to FY2017. Its backlog for aerospace and tests systems has also been increasing at a solid rate. At the end of the latest quarter, its aerospace backlog was around $233.2 million, while the book-to-bill ratio was standing at 1.14:1.

On the other hand, the backlog of test systems also increased to $69.1 million at the end of the latest quarter, higher from $49.9 million in the same period last year.

Overall, strong future fundamentals are enhancing investor’s sentiments. However, the stock looks overvalued trading at 34 times to earnings2.0 time’s sales ratio, compared to the industry average of 24 and 1.9 times, respectively. Selling ATRO stock after the recent rally looks like a good strategy to capitalize on recent gains, as higher valuations and lower actual earnings performance makes this stock relatively overvalued. Investors are suggested to wait for the pullback before starting position in this company.

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