If you've never heard of BK Technologies (BKTI), you're not alone.
The Florida-based manufacturer of wireless communication products has a market cap of just $140 million, putting it squarely in the micro-cap category. On Monday, BKTI stock jumped 26 spots in Barcharts’s Top 100 Stocks to Buy into the 32nd position.
The stock gained nearly 9% in yesterday’s trading, six times its average daily volume of 33,945. There wasn't any news to push the stock higher, so clearly, investors are still betting on its Q4 2024 results from last week.
Admittedly, while I've never heard of this company, the April 2 tariffs, which are set to come into effect tomorrow, have me thinking about companies that might do well in a tariff-laden economic environment.
At first glance, BK Technologies meets this criteria, as most of its products are American-made.
I don’t usually write about stocks this small, but given the current news surrounding tariffs, I couldn’t resist.
Up 163% in the past year; is it too late to buy? I consider this question.
How American-Made Is BK Technologies?
I’m Canadian. In recent weeks, the Trump administration's tariffs have had me looking at Canadian stocks to find names reasonably well insulated from the adverse effects of tariffs.
The same goes for American stocks.
There are public companies that will be less affected by tariffs on U.S. imports and exports to other countries that apply tariffs, such as Canada. Generally, these are smaller businesses that generate all or mostly all of their sales in the domestic market.
In 2024, the company generated $76.6 million in revenue, $2.5 million higher than a year earlier. BK Technologies generates revenue from selling LMRs (Land Mobile Radios) to the military, first responders, and public safety markets. It has also created a second business unit combining LMR technology with LTE/5G to provide customers with the best possible connectivity.
In business for over 70 years, this isn’t a growth company in the traditional sense. However, because of its focus on the U.S. domestic market, it could see an increased demand for its products because of the tariffs.
“Approximately 17.0% of the Company’s material, subassembly and product procurements in 2024 were sourced internationally, of which approximately 79.9% were sourced from seven suppliers.”
Is 83% enough for the Trump administration to consider its products American-made? I don’t have an answer to that. I don’t think anyone does. But it’s enough for me.
However, in November 2023, as part of its transition to an asset-light business model, BK Technologies entered into an MSA (Master Supply Agreement) with East West Manufacturing. This Georgia-based company has taken over manufacturing certain LMR products for BK Technologies.
As part of the agreement, East West acquired 77,250 shares of BKTI for $1 million and warrants to purchase another 135,300 shares over five years with an exercise price of $15. It’s done well on the share purchases.
While East West took over the manufacturing at BK Technologies’ Florida facilities, it also has plants in Vietnam, Mexico, Costa Rica and its own in Wisconsin. There’s a good chance the 83% number for the 83% mentioned earlier could fall under this MSA arrangement.
For now, I’d say it qualifies as American-made.
Does BK Technologies Generate Revenue Outside the U.S.?
It does, but it’s a small amount. In 2024, it was $1.7 million, or 2.2% overall, down from $3.1 million a year earlier. The company’s latest presentation does feature the logo of Alberta Health Services, the healthcare service provider for the province of Alberta.
The company’s latest product, the BKR 9000, launched in June 2023, appears to be gaining traction in the marketplace because of its functionality at a reasonable price point.
“Order activity for the BKR 9000 saw momentum throughout the year with considerable interest from state and local agencies seeking the radio's multiband capabilities and superior reliability at a price point they can afford,” stated CEO John Suzuki in the company’s Q4 2024 press release.
The good news for shareholders is that higher gross margins--they were 37.9% in 2024, 790 basis points higher than in 2023, and are expected to be 42% or higher in 2025--combined with healthy single-digit revenue growth (virtually all in the U.S.) in the year ahead should lead to $2.80 in adjusted earnings per share in 2025.
Although its shares are up 163% in the past year, hitting 52-week new highs on 24 occasions over the past year, it still trades at a reasonable 14 times its 2025 earnings estimate.
If you’re an aggressive investor, the margin expansion should be a nice catalyst to move its share price back into the $40s and beyond in the weeks ahead.
There aren’t options available for BKTI, so you’ll be doling out nearly $4,000 per 100 shares acquired. With single-digit sales growth, the company has little room for error in 2025.
Is it too late to buy? No, it isn’t, but the easy money has already been made unless it can find another catalyst (SaaS) to maintain momentum.
I guess we’ll see.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
