UTX) and Lockheed Martin ( LMT). But Cubic has redeeming features, namely its balance sheet. The company holds $253 million of cash and just $25 million of debt. The cash balance more than doubled since the year-earlier quarter as the company's debt load lessened by 21%. In addition, Cubic is a comparatively cheap stock. The shares are cheaper than the aerospace and defense peer group based on trailing earnings, projected earnings, book value and cash flow per share. However, its PEG ratio, a measure of value relative to growth expectations, is high at 1.4. By comparison, the industry average is 0.9. On that basis, the stock is expensive when considering analysts' expectations.
But the company's growth rates offer a differing perspective. During the past three years, Cubic has grown revenue 7% annually, on average, and boosted net income 32% a year. In addition to its promising transportation-systems business, one area of defense systems offers compelling growth prospects. Cubic is a leader in tactical-engagement simulation systems. In other words, it designs advanced computer systems for military training. For example, recently developed CombatRedi projects three-dimensional virtual-combat scenarios for troops. The U.S. military is always going to need guns and bullets, but in the future, the most profitable areas will be high-tech. Based on this reasoning, companies like Cubic Corp. and recurring Under-the-Radar pick ManTech International ( MANT) are investments worth considering. TheStreet.com rates Cubic "buy." The company's shares advanced 52% over the past year, more than the S&P 500 Index. -- Reported by Jake Lynch in Boston.