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Regardless of their reputation, most penny shares battle to ship on explosive guarantees. But when taking a look at Filtronic (LSE:FTC), the agency appears to have overwhelmed the chances and gone on to ship ginormous returns for loyal shareholders.
Shares of the digital aerospace gear group have skyrocketed by 1,212% during the last 5 years. Meaning a £1,000 funding in March 2020’s now price £12,120. And since 2025 kicked off, the now small-cap agency has surged by an extra 45%.
What’s behind this? And may this momentum proceed to ship one other 10x return in future?
Partnering with SpaceX is worthwhile
Filtronic has been making progress through the years. But it surely wasn’t till final April that progress kicked up a notch. Following a profitable partnership with Elon Musk’s SpaceX, Filtronic secured a $19.7m (£15.8m) contract to produce E-band SSPA modules for the Starlink Venture. These digital elements allow high-speed communication throughout 5G and different wi-fi networks.
The impression of this deal has been made completely obvious within the newest interim outcomes launched at the beginning of February. Income surged from £8.5m to £25.6m throughout the six months resulting in November 2024. On the identical time, working earnings jumped from a lack of £0.4m to a acquire of £6.8m. And administration’s already been deploying this further capital to increase manufacturing capability and develop its headcount.
It was just a few days later that Filtronic made one other announcement of a contract signed with SpaceX valued at $20.9m (£16.8m) to be delivered earlier than Might 2026. It appears its now largest buyer is kind of proud of the product and is coming again for extra.
One other 10-bagger?
Seeing a 200% leap in income is undeniably a trigger for celebration. So it’s no shock to see Filtronic’s share value rise out of penny inventory territory. Nonetheless, might or not it’s able to delivering yr one other quadruple-digit acquire over the subsequent 5 years?
Offering that the SpaceX contracts are fulfilled on time and to satisfaction, new alternatives will probably emerge. Not simply with SpaceX however with different aerospace and satellite tv for pc companies which have taken discover of Filtronic’s technological capabilities.
Nonetheless, whether or not that can translate into one other 1,000% share value return, I’m not so sure. Why? As a result of at a market-cap of £230m, it appears numerous this anticipated progress’s already baked into the inventory value. It’s additionally price declaring that a part of its take care of SpaceX granted the aerospace enterprise the fitting to amass roughly 10% of Filtronic’s fairness by share warrants.
SpaceX may determine to amass Filtronic for its know-how. After all, that is pure hypothesis. Nonetheless, whereas a takeover bid would probably ship the shares flying, a 1,000% buyout premium appears unbelievable.
What to look at
Proper now, I really feel Filtronic shares are totally valued by way of their potential. So this isn’t a enterprise I’m speeding so as to add to my portfolio immediately. Nonetheless, for present shareholders, a brand new vital threat has simply emerged. Virtually all of Filtronic’s newfound income progress stems from a single buyer – SpaceX.
Ought to the connection break down, or Filtronic’s elements merely gained’t be wanted anymore, changing this misplaced revenue can be a severe problem for administration. Within the worst-case situation, Filtronic might tumble again into penny inventory territory. I don’t see it as one to contemplate.
