Headquartered in Saskatoon, Canada, Draganfly Inc. (DPRO - Get Rating) operates as a manufacturer and seller of commercial unmanned aerial vehicles worldwide. The company’s product offerings include quad-copters, fixed-wing aircraft, ground-based robots, and hand-held controllers. It also provides software for tracking, live streaming, flight training, and data collection. DPRO serves public safety, agriculture, industrial inspections, and mapping and surveying markets.

Last month, DPRO announced that it would launch its new Access & Healthcare Solutions with its key partner Fobi AI Inc., to provide flexible and agile solutions to meet the needs of established organizations across a variety of major markets. The news solution might prove to be beneficial for the company. However, it might take some time for DPRO to realize substantial gains from this venture.

DPRO stock has gained 46% year-to-date, 90.4% over the past month, and 5.1% over the past five days to close yesterday’s trading session at $2.38.

Here is what could shape DPRO’s performance in the near term.

Bleak Trailing 12-month Financials

DPRO’s trailing 12-month EPS and net income stood at a negative $1.13 and $25.80 million. Also, its trailing 12-month EBITDA and operating income came in at a negative $13.12 million and $13.36 million. Moreover, the company’s trailing 12-month levered free cash flow stood at a negative $80.51 thousand, while its trailing 12-month cash from operations came in at a negative $14.75 million.

Stretched Valuations

In terms of its trailing 12-month EV/Sales, DPRO is currently trading at 9.74x, 401.2% higher than the industry average of 1.94x. Its trailing 12-month Price/Sales multiple of 9.97 is 571.7% higher than the industry average of 1.48.

Bleak Profit Margins

DPRO has an EBIT and EBITDA margin of a negative 245.04% and 240.71%, substantially lower than the industry averages. The stock has a levered FCF margin of a negative 1.48% compares with the industry average of 4.28%.

DPRO’s ROE and ROTC stand at a negative 147.47% and 46.94%, compare with the industry averages of 13.63% and 6.84%, respectively.

POWR Ratings Reflect Bleak Prospects

DPRO’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of D, equating to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

DPRO has a Value grade of D, in sync with its stretched valuations.

The stock has a D grade for Quality. Its negative profit margins justify this grade.

In the 74-stock Air/Defense Services industry, it is ranked #64. The industry is rated C.

Click here to see the additional POWR Ratings for DPRO (Growth, Momentum, Stability, and Sentiment).

View all the top stocks in the Air/Defense Services industry here.

Bottom Line

Given the growing commercial drone market, the company could benefit in the long term. However, its negative profit margins and stretched valuations are concerning. Therefore, we think it might be best to avoid the stock at the moment.

How Does Draganfly Inc. (DPRO) Stack Up Against its Peers?

While DPRO has an overall POWR Rating of D, one might consider looking at its industry peers, Moog Inc. (MOG.A - Get Rating) and Ducommun Incorporated (DCO - Get Rating), which have an overall A (Strong Buy) rating, and Kaman Corporation (KAMN - Get Rating) and Lockheed Martin Corporation (LMT - Get Rating), which have an overall B (Buy) rating.

DPRO shares were trading at $2.42 per share on Friday afternoon, up $0.04 (+1.68%). Year-to-date, DPRO has gained 48.47%, versus a -4.31% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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