Whenever you see a stock up more than 100%, the first assumption is that a buyout has occurred. Not so in the case of Giga-tronics Inc. (NASDAQ: GIGA). The company’s shares are so small in market value that most investors have never heard of the company. In fact, most investor screens might have skipped it entirely because of its tiny size.
Giga-tronics announced on Monday morning that it has completed a sole-source multiyear agreement with “a major aerospace company.” The agreement will have Giga-tronics develop a variant of its high-performance fast-tuning YIG filters for a third aircraft platform.
The company said that it has now received orders valued at approximately $6.9 million in connection with the agreement for the non-recurring engineering and for the delivery of a limited number of flight-qualified prototype hardware.
And the level keeps going up. The majority of the non-recurring engineering services are expected to be performed over the next 12 months, and Giga-tronics is now anticipating an additional multiyear order for approximately $10.0 million associated with the production units to be announced later this year.
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Giga-tronics Microsource has been supplying sole-sourced filters for a number of years, and it will be a supplier of filter systems for all three of the U.S.-designed fourth generation fighters.
Here is where the move comes into question. The stock was up 115% at $2.60 in midday trading. It trades an average of only about 10,000 shares per day, but shortly before 1:00 p.m. on Monday the stock had traded a whopping 5.7 million shares. Even at $2.60, its market cap is barely $13.5 million (yes, million with an “M”).
Giga-tronics even skips volume some days because the interest is so small. Now keep in mind that Giga-tronics’ revenue history is as follows: $14.187 million in 2013, $13.116 million in 2012 and $21.029 million in 2011. Revenue was $19.06 million in 2010.
Giga-tronics is one of these companies that has been public forever and has been forgotten in the annals of market history. It has been public for more than 20 years, and briefly nudged its shares to $10 and higher — back in the year 2000.
Please be advised and warned that micro-cap stocks require much more research and due diligence than traditional stocks. This appears to be the first time we have even covered this stock since 2006.
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