Shares of American Science & Engineering (ASEI) took a beating even after posting record quarterly sales and earnings: They fell from 45 a share in early May to 39 on June 1. ASEI makes X-ray and imaging systems that detect explosives, illegal drugs, and smuggled goods. Its chief product is the "Z Backscatter Van," now in use in Iraq, which scans vehicles for explosives. It is also being tested at some U.S. airports. The U.S. and foreign governments are the big buyers of ASEI products, notes Stephen Levenson of securities outfit Ryan Beck, who rates the stock outperform. A factor in the stock's fall was the drop in quarterly backlog orders by $12 million, to $72 million. But "we're more interested in ASEI's direction, which remains upward," he says. Levenson has a 12-month target of 54, based on his earnings forecast of $2.05 a share for the fiscal year ending Mar. 31, 2006, on sales of $127 million. In 2004, it earned 44 cents a share on $76 million in sales. Steven Gish of Roth Capital Partners, who tags the stock a strong buy, sees ASEI increasing its earnings power long-term.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial