DEFSEC Technologies Inc. (NASDAQ: DFSC)

Sector: Industrials Industry: Aerospace & Defense CIK: 0001889823
Market Cap 1.32 Mn
P/B 0.23
P/E -0.19
P/S 0.37
ROIC (Qtr) -152.04
Div Yield % 0.00
Rev 1y % (Qtr) 141.71
Total Debt (Qtr) 944,528.99
Debt/Equity (Qtr) 0.17

About

KWESST Micro Systems Inc. (KWE) is a company that operates in the defense and security industry, providing innovative solutions for military and civilian applications. The company's main business activities include the design, development, and production of proprietary technology for game-changing applications in the military and security forces and personal defense markets. KWESST generates revenue primarily through contracts with the United States government and its prime defense contractors. The company's primary products include non-lethal...

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Price action

Investment thesis

Bull case

  • Healthy cash reserves of 4.85M provide 35.40x coverage of short-term debt 136889.13, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 7.63M provides 8.08x coverage of total debt 944528.99, indicating robust asset backing and low credit risk.
  • Tangible assets of 7.63M provide exceptional 1372.89x coverage of deferred revenue 5558.70, showing strong service capability backing.
  • Cash reserves of 4.85M provide ample 1524.15x coverage of acquisition spending 3178.99, enabling strategic growth opportunities.
  • Tangible assets of 7.63M provide robust 25.16x coverage of other current liabilities 303359.42, indicating strong asset backing.

Bear case

  • Investment activities of (130730.43) provide weak support for R&D spending of 1.72M, which is -0.08x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating cash flow of (5.77M) provides insufficient coverage of deferred revenue obligations of 5558.70, which is -1037.32x, raising concerns about future service delivery capabilities.
  • The company's operating cash flow of (5.77M) shows concerning coverage of stock compensation expenses of 82385.51, with a -69.99 ratio indicating potential earnings quality issues.
  • High receivables of 1.08M relative to inventory of 376528.26 (2.88 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Free cash flow of (5.87M) provides weak coverage of capital expenditures of 101898.55, with a -57.59 ratio suggesting additional external financing needs for growth initiatives.

Peer comparison

Companies in the Aerospace & Defense
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 GE General Electric Co 342.94 Bn 42.54 7.80 20.84 Bn
2 RTX RTX Corp 252.05 Bn 38.24 2.93 40.71 Bn
3 BA Boeing Co 174.43 Bn -17.16 2.16 53.35 Bn
4 LMT Lockheed Martin Corp 126.61 Bn 30.15 1.73 22.19 Bn
5 GD General Dynamics Corp 95.62 Bn 22.69 1.86 8.01 Bn
6 NOC Northrop Grumman Corp /De/ 89.30 Bn 22.22 2.18 16.96 Bn
7 HWM Howmet Aerospace Inc. 88.16 Bn 60.80 11.05 3.19 Bn
8 TDG TransDigm Group INC 80.97 Bn 43.39 9.17 30.02 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.08 3.58
EV to Cash from Ops. EV/CFO -0.13 58.38
EV to Debt EV to Debt 0.81 98.04
EV to EBIT EV/EBIT -0.11 19.42
EV to EBITDA EV/EBITDA -0.13 33.60
EV to Free Cash Flow [EV/FCF] EV/FCF -0.13 91.66
EV to Market Cap EV to Market Cap 0.58 1.13
EV to Revenue EV/Rev 0.21 11.27
Price to Book Value [P/B] P/B 0.23 4.81
Price to Earnings [P/E] P/E -0.19 31.79
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 -3.75
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 22.95
Dividend per Basic Share Div per Share (Qtr) 0.00 0.70
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 14.15
Interest Coverage Int. cover (Qtr) -54.53 -18.00
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -36.76 -50.32
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 2,465.74 1,609.43
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 0.75
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -28.65 -30.98
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 7.49 10.65
EBIT Growth (1y) % EBIT 1y % (Qtr) -28.65 -26.90
EBT Growth (1y) % EBT 1y % (Qtr) -27.55 -27.25
EPS Growth (1y) % EPS 1y % (Qtr) 91.77 -99.21
FCF Growth (1y) % FCF 1y % (Qtr) 12.90 6.61
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 252.08 -5.55
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.28 0.51
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.07
Cash Ratio Cash Ratio (Qtr) 2.29 1.76
Current Ratio Curr Ratio (Qtr) 3.07 3.72
Debt to Equity Ratio Debt/Equity (Qtr) 0.17 0.07
Interest Cover Ratio Int Coverage (Qtr) -54.53 -18.00
Times Interest Earned Times Interest Earned (Qtr) -54.53 -18.00
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) -169.40 -345.84
EBIT Margin % EBIT Margin % (Qtr) -263.94 -382.63
EBT Margin % EBT Margin % (Qtr) -194.77 -387.93
Gross Margin % Gross Margin % (Qtr) 35.20 -33.31
Net Profit Margin % Net Margin % (Qtr) -194.80 -389.13