A Smart Way to Look at Anti-Terrorism

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It’s difficult to choose between both groups, per say, as both offer unique advantages. Steris is a global leader in decontamination and infection prevention, and three quarters of its revenue come from the U.S., according to its September investor presentation. Infection prevention products like sterilizers, skin care and chemical washers are responsible for the majority of its revenue, and it expects long-term revenue growth to be 3% to 6% a year. Wall Street expects Steris to grow its earnings by 11.5% a year over the next half-decade, and shares are fairly valued.

The other smaller player mentioned, Ceco Environmental, is about 20% cheaper from an earnings standpoint in comparison to Steris, and offers more growth. Analysts predict long-term EPS growth to hit 20% a year over the next five years. Ceco offers an array of chemical filtration products and one demand driver cited in a company report is the Department of Energy’s promotion of new technology growth in its biomass and gasification projects.

Of Raytheon, Lockheed and Northrop, meanwhile, the former offers investors the best growth potential. Wall Street expects EPS growth of 7% a year through 2018, and this figure is 6.5% for Lockheed and 1.5% for Northrop. Out of the three, Raytheon is also the only one that trades below a price-to-earnings growth ratio below 2.0, so there’s no overvaluation there.

Final thoughts

In short, there are many ways to play anti-terrorism, one of which is by investing in companies that offer products related to e-monitoring. When looking at the large-caps, Raytheon is the most attractive from a growth and valuation standpoint, and its yield is solid. We’re also bullish on the company’s SIGINT system in particular, which is fairly unique to the industry.

The smaller Ceco and Steris offer good growth potential with decent income, and it’d be wise to consider each for their separate emphases on different aspects of biochemical monitoring. Check out some more anti-terror stocks to watch here.

Disclosure: none

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