Firan Technology Group (TSE:FTG): EPS Acceleration and Insider Confidence Signal Undervaluation

Firan Technology Group (TSE:FTG) has emerged as a compelling investment opportunity in the aerospace and defense sector, driven by a surge in earnings momentum and strategic acquisitions that are diversifying its revenue streams. Despite a modest deceleration in return on equity (ROE), the company's accelerating earnings per share (EPS) growth, robust backlog, and insider buying suggest the stock is undervalued and poised for long-term gains.

Earnings Momentum: A 225% EPS Surge in Q1 2025

Firan's Q1 2025 results marked a historic high for the first quarter, with EPS soaring to $0.13, a 225% year-over-year increase from $0.04 in Q1 2024 (). This outperformance was fueled by a 214% rise in adjusted net earnings to $3.3 million, alongside a 22.6% revenue jump to $42.9 million. The company's backlog swelled to $142.5 million—a 43% year-over-year increase—while bookings rose 37% to $51.5 million, signaling strong demand for its aerospace and defense products.

Strategic Acquisitions Drive Diversification

The acquisition of FLYHT Aerospace Solutions in late 2024 has been a catalyst for Firan's growth. This move expanded its capabilities in aerospace aftermarket services and added recurring revenue streams. Additionally, the integration of Circuits Haverhill and Circuits Minnetonka into its operations has improved production efficiency and scalability. These acquisitions align with Firan's strategy to capitalize on the $200 billion global aerospace aftermarket, a market projected to grow at a 5% CAGR through 2030.

The company's entry into the defense sector via partnerships like the De Havilland Canadair 515 cockpit control assemblies contract (a $17 million deal) further diversifies its customer base, reducing reliance on commercial aviation alone.

Insider Confidence: A Bullish Signal

Insider buying has been a consistent theme at Firan, with directors and executives purchasing significant shares over the past year. For example, in late 2024, key insiders added $1.2 million worth of FTG shares, reflecting confidence in the company's trajectory. This activity is particularly notable given Firan's low net debt of $8.3 million and strong operating cash flow of $9.3 million, which provide financial flexibility for further acquisitions or shareholder returns.

Analyst Upgrades and a Robust Balance Sheet

Analysts have taken notice of Firan's performance, with consensus EPS estimates rising by 19% for 2025, while the price target has been upgraded to CA$12.67—a 26% premium to its current price. The company's balance sheet remains solid, with a current ratio of 2.1 (indicating ample liquidity) and no significant debt maturities until 2027.

Addressing the ROE Concern

Critics may point to Firan's ROE of 15.5%, categorized as low relative to industry peers. However, this metric is skewed by the company's strategic reinvestment in growth initiatives—such as the Hyderabad aerospace facility and CAAC-approved maintenance operations in Tianjin. These investments are expected to boost margins and ROE over the next 12–18 months, as scale benefits materialize.

Conclusion: A Rare Entry Point for Long-Term Growth

Firan Technology Group's accelerating EPS growth, diversified revenue streams, and insider conviction make its current valuation compelling. With a price-to-earnings (P/E) ratio of 15.7x versus its five-year average of 20x, the stock appears undervalued. Investors should consider accumulating FTG for its potential to deliver 20%+ annual EPS growth over the next three years, driven by backlog execution, market share gains, and accretive acquisitions.

Recommendation: Buy FTG for a long-term portfolio. A target price of CA$12.67 (implied 26% upside) aligns with analyst expectations, while downside risk is mitigated by the robust backlog and balance sheet.