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Filtronic (LSE:FTC) has been on a truly staggering run in the past five years. It’s up 1,550% over this period, going from a barely profitable 8p penny stock into a £290m-cap firm with strengthening fundamentals.
Now at 132p, the share price is up 70% this year alone!
SpaceX-fuelled rally
Filtronic designs and manufactures advanced radio frequency communications products for the telecommunications, defence, and space industries. Think amplifiers, filters, and transceivers.
The stock’s meteoric rise started back in April 2024 when the firm inked a game-changing strategic partnership with SpaceX. It now supplies special parts for the ground stations that communicate with SpaceX’s Starlink satellite constellation.
As part of the deal, Elon Musk’s space exploration company could even take a stake in the Durham-based firm.
The kit orders from SpaceX have been coming in thick and fast, with the last one in August being worth $62.5m (around £47m). This was for its next-generation gallium nitride E-band product, which delivers more than double the output power of the existing product line.
Filtronic CEO Nat Edington commented: “This landmark contract…not only sets a new commercial record for Filtronic, but also reflects the success of our partnership with world-leading satellite company SpaceX, supporting the Starlink constellation.”
Risks to keep in mind
Now, these record orders do add customer concentration risk. Filtronic is working hard to diversify its customer base, but there’s no getting away from this issue. Much of Filtronic’s current market value rests upon this SpaceX partnership.
Another issue here is that the timing and size of Filtronic’s orders can be unpredictable. So sales can spike on big wins but sag in quieter periods. And this is reflected in the earnings.
For example, the stock’s price-to-earnings (P/E) ratio is around 21 today, based on FY25 results. Yet that rises to 47 for this year (FY26), then falls back to 39 next year (FY27). This lumpiness makes earnings results more volatile and Filtronic’s valuation harder to gauge.
Therefore, Filtronic is better suited to investors considering buying the stock for the long term. This buy-and-hold approach should smooth out any lumpiness along the way.
Attractive growth opportunities
Filronic’s growth prospects look very strong. In space, there’s the rapidly growing Starlink constellation, which now has over 8,000 satellites in orbit. Long term, SpaceX plans to deploy as many as 42,000, creating a dense network capable of delivering fibre-like speeds and ultra-low latency internet to virtually every corner of the planet. From remote villages and war zones to cruise ships and planes.
Meanwhile, in defence, there will surely be ample opportunities for growth as European military spending is ramped up. In July, the company bagged a new £13.4m defence contract to supply high-performance modules for an electronic sensor system.
The chief executive said: “Aerospace and defence remains a key sector in our growth strategy, and this latest order reflects Filtronic’s proven track record of successful project delivery, collaborative partnerships, and manufacturing excellence.”
Filtronic is still a smallish company, so doesn’t have many analyst teams covering it. But the two that do form a 12-month consensus price target of 199p. It may never reach this, of course, but it’s roughly 56% above the current price.
For investors bullish on Starlink and defence spending, I reckon Filtronic is worth assessing more closely.
