Applied Aerospace & Defense, Inc. (NYSE:AADX) was among the stocks on which Jim Cramer gave his opinion, as he warned that increased AI-related spending might cause near-term headwind for stocks. Cramer highlighted that it is a story he likes, as he stated:
Now, which some of you may find discouraging, me, I actually like deals that break the print as long as I am not in them, tends to create bargains that I could sit back and look at, especially now that the market cap’s only $3.25 billion. If we add back the company’s post IPO net debt total, we get an enterprise value of $3.57 billion, and if we use a very crude 2026 EBITDA estimate of 114.8 million, that’s four times what they made in the first quarter, then we get an enterprise multiple of 31… I’m okay using a lower EBITDA estimate because I want to be conservative… So, is an enterprise multiple of 31 a good price? Honestly, still a bit high. It’s probably why the stock broke the print…
I can easily see a scenario where my back-of-the-envelope EBITDA estimates turn out to be too low, possibly way too low, and Applied Aerospace, which is in all the right end markets, looks a whole lot cheaper in retrospect. Here’s how I see it: In general, this is a story I like and a stock I want to own at some price. Ideally, you get a couple of bucks lower, say somewhere in the mid-teens, where it would have a mid-20s enterprise multiple based on a rough EBITDA estimate. That’s good.
Based on the stock’s lukewarm reception today, not impossible, though, I don’t think you can count on it getting down that low. But if you really like the story, then you know what? You’ve got my blessing to buy it here. This wasn’t a super hot start. You’re not chasing anything. Valuation isn’t crazy, just a little elevated. And like I just told you, in reality, the stock’s probably quite a bit cheaper than it looks. Here’s the bottom line: I actually like this Applied Aerospace Defense… If you can get the stock at a price you feel comfortable with, you know what, I say go for it.
Photo by Adam Nowakowski on Unsplash
Applied Aerospace & Defense, Inc. (NYSE:AADX) designs, engineers, and manufactures integrated subsystems for space, defense aviation, airborne, C5ISR, and precision strike applications. The company uses IP-enabled manufacturing, prototyping, and in-house testing services for its hardware.
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