A few years ago, Filtronic (LSE:FTC) was a penny share barely on most investors’ radar. Yet since then, the stock’s gone on a rampage, rising 133.8% in the last 12 months and an astonishing 3,070.7% since June 2021!
Those kinds of numbers are exactly the sort of long-term returns that can turn modest stakes into life-changing wealth, potentially even millionaire status. But with the shares now around 320p, can this massive momentum really continue?
Why’s Filtronic thriving?
At its core, Filtronic designs and manufactures advanced radio-frequency (RF) components and subsystems. Its technology sits inside high‑performance links for space, aerospace, defence, and telecoms infrastructure, carrying huge amounts of data at high speed and low latency.
That’s proven to be critical for low-earth-orbit satellite constellations and secure military systems, which has transformed the business from niche RF parts supplier into a key enabler of next-generation connectivity technology.
As a result, the firm’s been winning a series of chunky contracts, dramatically upgrading Filtronic’s outlook, particularly its deepening partnership with SpaceX’s Starlink network.
But beyond SpaceX, Filtronic has secured orders from major European defence primes and additional multi‑year deals with US customers, broadening its high‑value pipeline. And institutional analysts started taking notice, with even Berenberg issuing a Buy recommendation last October.
So far, anyone who followed this tip is already sitting on a massive gain. So with Berenberg once again reiterating its recommendation in April, should investors think about buying shares today?
Explosive potential, explosive risk
Global demand for high-frequency RF solutions is growing rapidly. And with decades of expertise in this field supported by a modernised manufacturing base, Filtronic has a significant advantage over most of its peers that’s not easy to replicate.
So if satellite operators keep expanding constellations and defence budgets remain elevated, Filtronic’s order book has the potential to expand even further. For reference, the estimated market size for low-earth-orbit satellites is expected to reach $100bn by 2035!
While this is undoubtedly exciting, it’s essential not to ignore the risks this business faces. With a revenue stream sitting at around £56m against a £712m market-cap, investors are already pricing in a substantial chunk of this growth potential. That’s not necessarily a problem if the company continues to exceed expectations.
However, Filtronic has some critical weak spots. The company’s almost entirely dependent on just a handful of customers. And any delays, design changes, or reduction in follow-on orders could hit both earnings and investor sentiment hard. Moreover, with aerospace orders often very lumpy, Filtronic shares are naturally exposed to increased volatility.
So what should investors make of all this?
What’s the verdict?
For me, Filtronic’s a fascinating business. And over the long term, if it continues to execute sucessfully, this ex-penny share seems to have amazing potential to deliver substantial returns.
Having said that, I think it’s unlikely to deliver another 3,000%+ gain from today’s valuation in the near future, at least not without a major profit surprise.
As it stands, the stock’s being priced as if it’s already succeeded, which isn’t the case. There remains a long road ahead. But I think it would be wise to keep a close eye on this enterprise moving forward. And it’s not the only ex-penny share I’ve got my eye on…
Should you invest £5,000 in Filtronic Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Filtronic Plc made the list?
Zaven Boyrazian does not hold any positions in the companies mentioned.
