As the ASX tries to make heads or tails of a possible war in Europe, one small-cap is in the green today.
$69 million defence-tech play Droneshield Ltd [ASX:DRO] is up 6.25% at time of writing. It’s helping the stock stave off some of the recent volatility afflicting a lot of the market.
The reason behind the upward move was the release of the company’s annual report — a comprehensive look at Droneshield’s financial figures for the 2021 calendar year.
Let’s take a closer look…
Sales growth helps ease net loss
The big-ticket result for Droneshield is undoubtedly their 91% increase in revenue. They made over $10.5 million in sales for 2021.
That is exactly the kind of growth that investors want and expect from a small-cap tech play.
Another positive takeaway is an improving earnings position. Management notes that standstill EBITDA is finally turning positive — a precursor to hopefully total EBITDA following suit in the near future.
When it comes to total earnings and profit though, Droneshield is still in the red. And while both losses were less than the same result this time last year, a 9% improvement in both is likely not enough to totally convince investors of a turnaround.
For that reason, management will need to do more to improve this bottom line. Or deliver some incredible sales growth to justify a more muted result.
Given the fact that global conflict is on people’s minds however, demand for Droneshields products may see this kind of growth. That is if things really kick off in Europe.
As Chairman Peter James comments:
‘Despite the COVID-19 slowdown, drones continued to present a rapidly growing threat, both across State-level warfare (including the current Russia-Ukraine conflict), and non-State actors continuing to use drones for nefarious applications at airports, prisons, critical infrastructure and other situations, such as Mexican cartel, Houthi and Myanmar rebel attacks.
‘At the macro level, international tensions and greyzone warfare (which CUAS, Electronic Warfare (EW) and related areas are a key part of) continue to rise, driving increases in security and national defence budgets. The Company currently offers its products in over 100 countries and the diversity of its pipeline is one of its key strengths.’
What’s next for Droneshield?
With these results out of the way, the focus for Droneshield unequivocally turns to 2022. The small-cap needs to continue to deliver on the momentum they’ve built in 2021.
As for how and to what degree they manage to accomplish that, time will tell.
For investors though, today’s result is a good continuation of what will hopefully be more to come. Droneshield is heading in the right direction and has the possibility of a favourable market in their future.
But if defence stocks make you a little uncomfortable, then there are plenty of alternatives. The small-cap space is bustling with exciting tech plays that are far less deadly.
For example, AI is one of the sectors heavily on the rise. It’s increasing in prominence as more businesses expand upon this exciting new technology. And to help you get started in investing in AI, we’ve put together a list of five of our favourite AI stocks.
You can find them all in our free report, right here.
Regards,
Ryan Clarkson-Ledward,
For Money Morning
