The Adacel Technologies share price is now up 760% this year. Is it still a buy?

Credit: Woodys Aeroimages

Adacel Technologies Limited (ASX: ADA) has seen its share price rocket up 768% to trade around $2.17 since the start of this year, making some of its shareholders very rich indeed.

Motley Fool contributor Matt Brazier listed Adacel as his latest investment back in June 2015. Since then the share price is up 266%.

Adacel sells air traffic control systems and air traffic control (ATC) simulators as well as voice recognition software that can be used to speak directly to aircraft, and replace human controllers during training.

The company has obviously had an outstanding year with a number of accomplishments pushing the share price higher…

  1. In February, Adacel reported a 54.2% increase in half-year net profit
  2. In April, the company signed new long-term contracts with partners the US Federal Aviation Administration (FAA) and the US Air Force (USAF). The FAA contract was worth US$46 million over 5 years if all options exercised.
  3. A new contract to supply a simulator for the Trinidad and Tobago Civil Aviation Authority.
  4. A contract with the Directorate of Air Navigation Services for France (DSNA) for a new air traffic management system for Cayenne, French Guiana. It’s the first in a series planned by the DSNA for overseas territories.
  5. Acquisition of Computer Sciences Corporation NexSim ATC simulator business.
  6. Two contracts awarded by the Royal Australian Air Force (RAAF) value at more than $2.5 million.
  7. Three profit upgrades, including the forecast of a 50% increase in profit before tax (PBT) for the 2016 financial year, with dividends likely to jump.

It’s clearly been a dream run for shareholders who have held on, and there could be more to come.

Foolish takeaway

No wonder the company is currently trading on a trailing P/E ratio of around 43x. But if PBT is increasing at 50% this financial year, that P/E ratio will likely drop to around 28.6x – a not-unreasonable price for a company with such high growth and future potential. I know I’ve got Adacel on my watchlist.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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