Stock Sonar #75 - 10/2/2024

Kimball Electronics (NAS:KE) — mrkt cap $443mm; Price $17.89; EV/EBITDA 6

PASS. Kimball Electronics specializes in producing printed circuit boards (PCBs), primarily serving the automotive and medical industries. These PCBs, typically around 5” x 5” in size, control critical applications like automotive steering systems. Despite the need for extremely high precision—meeting the ‘five 9s’ standard for reliability—the market remains highly competitive and is largely controlled by end customers. Gross margins have consistently been below ten percent. To address this, KE is shifting its focus toward the medical sector and moving up the value chain, aiming to become more of a finished goods manufacturer. The current CEO has indicated that acquisitions are under consideration as part of the company’s growth strategy. While KE is operationally efficient, expanding into new sectors and pursuing acquisitions introduces considerable operational and balance sheet risks.

PowerFleet (NAS:AIOT) — mrkt cap $536mm; Price $4.98; EV/EBITDA 110

PASS. PowerFleet operates IoT devices in three areas: industrial (forklifts and material movement), logistics (trailer tracking and in-cab solutions), and fleet management (with clients like Avis). The company benefits from the growing digitization of supply chains but faces stiff competition from Samsara and Geotab. More than 60% of its revenue comes from Israel and South Africa, which presents risks. A bigger challenge is that OEMs are now offering built-in telematics with APIs, allowing customers to skip third-party providers like PowerFleet. These factors are likely obstacles to the company’s future growth.

Blade Air Mobility (NAS:BLDE) — mrkt cap $237mm; Price $3.05; EV/EBITDA NA

MORE RESEARCH NEEDED. Blade Air Mobility (BLDE) operates the largest marketplace for helicopter rides and provides transportation services for organ transplants across the nation. Unlike many other de-SPACs, BLDE maintains a strong balance sheet with nearly $150 million in cash, has quadrupled its revenue over the past three years, and is nearing GAAP profitability. BLDE’s business segments benefit from local economies of scale and significant fixed cost advantages in areas such as landing rights and labor. However, competition is intensifying, particularly in the organ transplant market. BLDE’s management also seems prudent in capital allocation and execution, focusing on core competencies and cash flow. Further analysis is needed to evaluate the long-term sustainability of their competitive advantages.