Arxis' (ARXS) organic growth and compounder potential are undervalued at current stock price levels, Morgan Stanley said in a Monday note.
The company, which provides highly engineered electronic and mechanical components designed for harsh environments in the defense and space sectors, focuses on proprietary products, from which it derives around 90% of its revenue, Morgan Stanley analysts said. This offers Arxis pricing power and a sustainable competitive moat, the analysts noted.
Highly diversified across products, end markets, customers, and platforms, Arxis is poised for organic and inorganic growth, and it has a solid history of acquiring and integrating strategic targets for value creation and cross-selling opportunities, the analysts said.
Arxis displays the marks of an "industrial compounder" with its durable competitive advantages and successful track record in acquisitions. The company gives investors wide exposure to positive industry trends in defense and space, commercial aerospace, and specialized industrial technology, according to the note.
Morgan Stanley initiated coverage of the company's stock at overweight with a price target of $44.
Price: $36.82, Change: $+1.72, Percent Change: +4.89%