This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

December 4, 2008 - Axsys Technologies Inc. (AXYS-NASDAQ) designs and manufactures precision optical solutions for defense, aerospace, homeland security, and commercial applications. The company operates in two Segments, the Surveillance Systems Group and the Imaging Systems Group.

The Imaging Systems Group manufactures and sells optical and motion control subsystems and components for deployment in integrated systems. Its products include visible and infrared lenses, scanning systems, laser positioners, long-range telescopes, stabilized sensor positioning systems, precision motion-control components, and imaging optics. The company sells its products to various government institutions, such as the U.S. BorderPatrol, Army, Navy, Air Force, and Coast Guard, as well as defense contractors for integration into larger platforms. Axsys Technologieswas incorporated in 1959 and is headquartered in Rocky Hill, Connecticut.

This is one silver lining for all the clouds formed by global instability. The company offers some of the best arsenal against terrorism, particularly in Iraq and Afghanistan.

Earnings jumped in the third quarter to 71 cents a share, more than double the 34 cents earned in the same quarter last year. Sales improved by 43% to $64.8 million, up from $45.2 million last year in the same quarter. Backlog increased to a record of $174.1 million in the quarter, allowing management to forecast full-year earnings estimate of $2.09 to $2.15, up from a previous prognostication of $1.88 to $1.92. Analysts see $2.30 this year, up from $1.32 last year, then $2.70 next year. Over the next 5 years, analysts project 21% a year growth, on average, for AXYS, up from 17.75% annual average for the last 5 years.

Sales estimates were also raised by management, going from a range of $224 million - $228 million to $237 million - $241 million. Analysts think final revenues will be $243.7 million this year and $283.4 million next year.

President elect Obama has already stated his desire to withdraw from Iraq. But that doesn't mean a lesser determination to fight terrorism. The best effort against it will be in Afghanistan where the U.S. already has a presence. Expect more troops and equipment moved there once Iraq is finished. That means expenditures on military equipment will most likely continue at the same or higher rate.

The company has increased its Research and Development efforts as well as marketing, seizing the current opportunities and expecting more. In particular, the infrared market is growing noticably with global spending estimated at $5 billion a year. Another hot market: the pilotless drones franchise due to its safety and uses in isolated areas.

More numbers: Trailing P/E is 32. Price to Sales is 3.55 while Price to Book is 4.50. Operating margin for the last 12 months was 15.75% and Profit margin was 10.90%. Return on equity is a respectable 14.56%. There is no debt. Current ratio is 2.57. Book Value is $16.16 a share. There are only 11.19 million shares outstanding with a float of 9.22 million. Insiders own 21% of the stock. Institutions own 75.8%. There is no dividend.

This stock got noticed over the last 2 weeks, after its earnings were released. It went from $55 a share to $71. The high for the year was on August 13 when the stock touched $79.69. The low was $34.02. With earnings ramping so fast in the last quarter and high expectations for the years ahead, this stock is one of the few bright spots in the market. Still with valuations this high most of the good news seems already in the price.

Company Web site: www.axsys.com

- Ted Allrich