This Small Space Stock Just Got Bigger -- and More Profitable

Core Viewpoint - Redwire is acquiring Hera Systems, a profitable spacecraft developer, at a bargain price, which is expected to enhance its future growth and profitability despite recent financial challenges [4][5][7]. Financial Performance - In Q2, Redwire's revenue grew by 30% year over year, exceeding analyst estimates by nearly $10 million [2] - However, the company reported a loss of$0.42 per share, which was four times greater than Wall Street's expectations, and free cash flow turned negative at $11.2 million [2][5]. Acquisition Details - Redwire will acquire Hera Systems for an undisclosed amount, with expectations that Hera could contribute up to$10 million to Redwire's 2024 revenue [4][6]. - The acquisition price implies a price-to-sales ratio of just 0.5, which is considered a bargain for a profitable space company [7][8]. Strategic Implications - The acquisition positions Redwire to enter the emerging market for spacecraft that can service other spacecraft in orbit, known as "space tugs" [9]. - Hera is contracted to build three satellites for an on-orbit servicing demonstration under a U.S. Space Force contract, indicating strategic alignment with national security missions [9][10]. Future Outlook - Analysts forecast a return to positive free cash flow for Redwire as early as next year, with strong double-digit sales growth expected through 2027 and beyond [11].