2016 may very well be the year of the drone.
The unmanned aerial vehicle (UAV), often referred to as a pilotless drone, is the darling of Pentagon planners, largely because it's able to find and kill enemy combatants without putting American soldiers at risk. Fact is, a drone is always willing to die for its country. At the same time, drones are increasingly pervasive in the civilian sector for business and consumer applications.
All of these trends make AeroVironment (AVAV) , the leading manufacturer of unmanned drones, a good bet now on the fast growth of these futuristic machines. The stock is among a group of small-cap technology companies that are poised to rocket higher in 2016.
AeroVironment stock has soared 6.72% over the last five days, in the wake of stellar operating results. With a market cap of only $662.66 million and dominance of its industry, the company has plenty of room to grow.
Contrast the company's size and focus with its leading competitors, Raytheon (market cap: $38.26 billion) and Boeing (market cap: $98.38 billion), which are more diversified aerospace and defense giants.
Although often portrayed by his opponents as soft on defense, President Obama has shown a hearty willingness to deploy "hunter-killer" drones in combat theaters overseas and his administration continually proposes big hikes in drone spending.
Meanwhile, a "drone caucus" has emerged in the halls of Congress that fiercely protects drone funding and touts them as a way to help save money on defense, protect the lives of U.S. soldiers, better patrol America's borders, and assist law enforcement agencies in surveillance.
AeroVironment reported second quarter fiscal 2016 financial results on Dec. 8, exceeding analysts' expectations for both revenue and earnings. Revenue came in at $64.7 million, a year-over-year increase of 23%. Earnings reached $4.4 million for earnings per share of 19 cents, after a loss in the year-ago quarter. The company's unmanned aircraft systems segment drove the results, with revenue up 31% year-over-year in the quarter. Significantly for future growth, AeroVironment reported that its backlog increased nearly 50% in the quarter to $97.2 million.