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January 3, 2006 Stock Pick: Innovative Solutions & Support, Inc. (ISSC)

Stock Price: $12.78

Innovative Solutions & Support, Inc. is a designer of flight information computers and flat-panel displays. The company sells to the Department of Defense, other government agencies, defense contractors, commercial air transport carriers, and original equipment manufacturers.

This company is coming off its strongest year in its history. In 2005, Innovative Solutions generated revenue of $63.26 million with net income of $18.58 million. The market has yet to realize this record growth. In fact, ISSC is at a lower price than this time last year. ISSC is moving off of its support and starting a much expected reversal.

ISSC is trading with a market cap of $231.28 million, but at a P/E of only 12.58. The company is going to experience strong flat-panel display revenue growth in 2006. There are just over 18 million shares outstanding and the company authorized the repurchase of up to two million shares. This will raise the company's EPS and lower the general supply of ISSC.

Right now, the company has $83.17 million in cash on the balance sheet. A short squeeze could be in the cards with 24.2% of the 13.9 million ISSC float being shorted.

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