Breaking Out: Can DroneShield's "little brother" EOS come of age?

Breaking Out is a technical analysis-fuelled, short ‘n’ sharp take on chart-busting ASX stocks. Each week, Steve Collette – head of Collette Capital in Melbourne – narrows in on something that’s caught his eye.

Electro Optic Systems (ASX:EOS)

EOS operates in two divisions – Defence Systems and Space Systems. The price action is progressive against an obvious backdrop of geopolitical instability.

EOS has wrangled itself into an EBITDA positive situation for the six months ended June 30 to the tune of $11.5m, and increased revenue to $142.6m from the previous corresponding period.

It also has big brother DroneShield (ASX:DRO) inhabiting north of a billion dollar market cap on the ASX (~$1.2bn at time of writing).

In comparison, EOS at ~$300 million market cap almost seems modest given they are a proper growth name in a growth industry with positive EBITDA as the kicker.

There is strong support across 120c, which held on tests in both June and more recently in September.

The last few days of price action have seen EOS put its head above the confluence of both the 50-day and 200-day simple moving averages at around 151c currently.

The close on Monday at 161c, after again testing the 200-day average at 151c, was a solid show of short-term support.

It would be good to see 150c hold in the short term, however in acknowledging the 62% volatility the name has generated on a 30-day basis, we will size exposures to risk down to 136c.

On the upside, the first target would be recent highs of 209c. Beyond that, one might generalise to relevant conditions now compared to those experienced during highs north of $10 a share just four years ago in 2020.

Collette Capital offers IMA services to wholesale clients only. Learn more at www.collette.capital

Collette Capital is a Corporate Authorised Representative (CAR: 128443) of Sanlam Private Wealth (AFSL 337927), and only provides general advice.

Collette Capital advise that they and persons associated with them may have an interest in the above securities.

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