LightPath Technologies: A $4-stock offering tech that is virtually used everywhere

From telecom to defense and from consumer goods to medtech – one will find few companies that cater to a wide and diversified clientele as LightPath Technologies (NASDAQ: LPTH).  An optical solutions provider, LightPath specializes in infrared products and precision-molded optics that are witnessing robust adoption year after year.  

Last week, the Orlando, Florida-based company reported record quarterly revenues of $9.9 million, as well as a backlog that hit an all-time high. In fact, the company has been spending on improving its production capacity over the last year to meet the rising global demand for its solutions. Last month, LightPath completed the capacity expansion of its facility in Latvia, which was aimed at improving the efficiency of its new infrared coating capabilities. The management expects to see a positive impact on the margins from this expansion within a year.

Building a foundation for growth

In an interview with AlphaStreet, LightPath CEO Sam Rubin said the capital expenditure trend should continue into 2021.

“The growth in 5G directly translated to a growth in our sales and the need to add more capacity. And so we have been focused on that. Currently, we are also spending on adding more capabilities in design and engineering, as well as in equipment to test, measure, and assemble some complex systems,” he said.

Adapting to market trends

The capital deployment into additional capabilities is apparently part of the larger strategic shift from being a component manufacturer to a provider of optical solutions. Rubin, who took up the top post almost a year ago, has been committed to making the firm more vertically integrated by adding design and assembling capabilities, in turn, enabling it to adapt to the changing client requirements.   

According to him, customers are now more inclined to building partnerships with optics companies, rather than just sourcing the components. Transforming into a solutions provider gives extra value to the client, at the same time paving way for margin expansion. While LightPath announced a gross margin of 38% in the first half of fiscal 2021, the CEO anticipates margins to rise to up to 55% with the adoption of assembling and engineering solutions.  

Rubin sees the record backlog at the end of the recent quarter as an impact of this shift in focus.

“Many customers in the spaces of defense, instrumentation, medical etc provide blanket orders for a year or so. We have customers that talk to us about placing an order for seven years. And some of the new products we launched are specifically to enable that,” he said.

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For more insights into LightPath Technologies, read the latest earnings call transcript.  

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The CEO added that the management’s focus during the upcoming quarters would be the firm’s ability to scale its solutions capabilities. LightPath’s optical solutions have a wide range of applications including in thermal cameras, temperature measurement devices, thermal weapon sight, as well as aerospace and defense vision systems.

As on Wednesday, the stock was trading at $4.00 apiece. Interestingly, the stock has more than tripled during the trailing 12 months. LightPath Technologies has a 12-month average price target of $5, which is at a 24% upside from the current trading price.

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