Which one should you buy?

Intuitive Machines (LUNR): A small-cap company that made history by landing a private spaceship on the moon. Despite recent volatility, its shares are trading at a low valuation with potential for significant revenue growth and positive earnings in the future.Intuitive Machines (LUNR): A small-cap company that made history by landing a private spaceship on the moon. Despite recent volatility, its shares are trading at a low valuation with potential for significant revenue growth and positive earnings in the future. Redwire (RDW): A player in space infrastructure construction, involved in various projects, including solar array wings for Orbital Reef and robotic arms for lunar landers. Financially, it stands out with positive free cash flow, making it one of the few space companies that don’t rely on dilutive share issuances. Spire Global (SPIR): Specializes in satellite data analysis, collaborating with Nvidia to enhance weather forecast models. Its revenue has tripled in three years and is predicted to achieve profitability in the near term. While it doesn’t generate many press releases, it offers growth potential.

How much are space resources worth?

This question came to mind last year as I watched the shares of SPAC-sponsored space companies plummet in price. Boosted by low interest rates and the large amount of free government stimulus money handed out during the pandemic, several space stocks went “to the moon” with big dreams but small (or no) profits. But when the money dried up and the dreams dimmed, stock prices followed suit.

In 2023, most of these space SPACs were trading at 70%, 80% and even 90% below their 2021 IPO prices – which, to be fair, were probably overpriced. However, now that a few years have passed and these stocks have had time to grow some in their valuation, I think we finally have a handful of stocks worth considering as growth investments at a reasonable price.

Here are my top three prospects: Intuitive machines (NASDAQ: LUNR), Thread (NYSE: RDW)And Spiral Global (NYSE: SPIR).

1. Intuitive machines

Tiny Intuitive Machines dominated headlines earlier this year when the Odysseus lunar lander became the first privately built spaceship to ever land on the moon. The share price fluctuated wildly in the weeks surrounding this event, approximately tripling when the landing was first achieved, before falling following revelations that Odysseus did not land 100% upright. The crazy thing is that just four months after the event, Intuitive Machines shares are trading at the same levels as before for the landing happened – less than $4 per share and at a valuation of less than 1x tracking sales.

Do not get me wrong. This share is not a certainty. Intuitive only has about $55 million in cash and is burning $56 million per year. Still, with two more lunar missions on the horizon, sales are expected to almost triple this year compared to 2023, before almost doubling again in 2025. Corporate earnings could also turn positive next year.

At its current valuation, I see the stock as having a lot of potential, and not much risk, assuming it can raise enough money to stay active at all.

2. Common thread

Redwire is a second space stock worth keeping an eye on. One of just a handful of space companies named to assist with Jeff Bezos’ Orbital Reef space station project, Redwire serves as a jack-of-all-trades in space infrastructure construction. In the past month it has scored contracts to build:

• Roll-Out Solar Array (ROSA) wings for European space giant Thales Alenia.

• A robotic arm for the European Space Agency’s Argonaut lunar lander.

• And an air-breathing satellite for DARPA.

On the financial side, Redwire is slightly more expensive than Intuitive Machines, with revenue lagging 1.4x (but still well below my estimate of the average valuation of unprofitable aerospace stocks). Most attractive of all, Redwire is one of the very first stocks in the space sector to report positive free cash flow, generating $12 million in cash over the last twelve months.

The story continues

If Redwire can keep that up, it could be one of the best-priced aerospace stocks out there today. only space stocks that don’t have to make dilutive share issuances to keep themselves solvent. As a plus for investors, Redwire should be one of the easiest space stocks to value going forward.

3. Muscle global

One of a growing number of space companies specializing in the analysis of data generated by satellite imagery, Spire operates an asset-lite business model that – if it plays its cards right – could enable strong revenue growth. A recent collaboration with Nvidia Connecting Spire weather data to an Nvidia AI to train weather forecast models illustrates this potential.

(That’s right. You could say Spire is now an artificial intelligence company).

And that’s just the most recent example. Spire’s turnover has already tripled in the past three years. As the company scales, analysts polled by S&P Global Market Intelligence predict that Spire could achieve operating profitability as early as next year.

Spire doesn’t put out many press releases. The announcement of a satellite-based air traffic monitoring project (in partnership with Thales) last week was the first such PR since Nvidia’s announcement more than a month ago. Despite flying somewhat under the radar, the company is actually the most expensive of the three stocks profiled here today, costing 2.4 times trailing sales.

If I were to rank these three picks in order of attractiveness, I’d say I consider Redwire to be the safest bet based on free cash flow – making it No. 1 on my list. More growth-oriented investors may prefer Intuitive Machines for its cheap valuation and potential for explosive revenue growth, but it’s No. 2 on my list.

That makes Spire Global number 3. It has potential, but I consider it more of a ‘show-me’ stock for now.

Should you invest €1,000 in intuitive machines now?

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

3 Tiny Space Value Stocks: Which One Should You Buy? was originally published by The Motley Fool