When most people think about defense-related companies, the names that pop up are usually giants like Lockheed Martin, Boeing, or Northrop Grumman. Hidden behind these giants, however, are much smaller, niche players that quietly build strong businesses with excellent profitability. One such compounder, which I have personally been following and investing in for years, is FMS Enterprises Migun Ltd.
Before I dive into the details, let me make something very clear: this is not investment advice. I am only sharing my interpretation of the company and why I find it an interesting business from a value investing perspective. Every investor must do their own due diligence and make decisions that fit their own financial goals and risk tolerance.
With that said, let’s explore what makes FMS Enterprises Migun worth looking into.
A Quick Introduction to FMS Enterprises Migun
FMS Enterprises Migun Ltd (ticker: FBRT on the Tel Aviv Stock Exchange) is not a household name. Founded in 1986 and publicly listed since 1992, the company specializes in advanced ballistic protection materials. In simple terms, they make the fabrics and panels used in armor systems for personal protection, vehicles, ships, and aircraft.
Their products include:
- Uni-directional polyethylene (UD-PE) fabrics
- Aramid fabrics (another strong synthetic fiber)
- Pressed armor panels
- Finished protective gear and solutions
The interesting twist is that FMS is the only company in the world that produces both UD-PE and UD-Aramid under one roof. That unique capability makes switching suppliers difficult for their customers, a textbook example of a “moat” in value investing language.
The company operates globally with manufacturing and R&D facilities in Israel, the U.S., and India, serving defense organizations and security forces worldwide.
A Look at the Numbers
Now, numbers don’t tell the whole story—but they certainly give us a solid foundation. And FMS has numbers that any value investor would love.
Here are some of the most striking metrics (data based on first QR of 2025 and before):
- Revenue (TTM): ILS 407.6 million
- Net Income (TTM): ILS 133.5 million
- Market Capitalization (USD): $1.53 billion (≈ ILS 5.7 billion)
- Debt/Equity: 0.007 (essentially debt-free)
- ROIC: 47.8%
- ROE: 26.8%
- Net Profit Margin: 33.9%
- Dividend Yield: 7.9% (paid in US dollars!)
Those figures jump off the page. A return on invested capital of nearly 48% is remarkable and far above what most businesses ever achieve. A net margin of nearly 34% signals both efficiency and strong pricing power.
And perhaps most importantly for conservative investors: the company carries almost no debt. That means it has a cushion against downturns and isn’t beholden to banks or creditors.
Growth Story: Not Always Smooth, But Compounding
Over the past decade, FMS has delivered (data based on first QR of 2025 and before):
- Revenue CAGR (10 yr): 8.2%
- Operating Income CAGR (10 yr): 12.2%
- Net Income CAGR (10 yr): 14.5%
- Operating Cash Flow CAGR (10 yr): 15.9%
While growth has been somewhat volatile (as is typical in defense-related businesses), the overall trend is undeniably positive. More recently, free cash flow has accelerated at a 34% CAGR over the past three years. That kind of growth in cash generation is a strong sign that the business is not only growing but also becoming more efficient in turning profits into real, usable money.
What Makes FMS Stand Out?
From a value investing perspective, the most compelling aspects of FMS include:
- Unique Production Capabilities
As mentioned earlier, FMS is the only company producing both UD-PE and UD-Aramid fabrics under one roof. That gives it a unique selling point and builds strong customer loyalty. - Certified In-House Ballistics Lab
Having its own lab, certified by the Israeli Defense Forces and Police, allows FMS to rapidly develop and test new products. This accelerates innovation and reduces reliance on outside institutions. - Exceptional Balance Sheet
With near-zero leverage, FMS doesn’t carry the typical financial risks that many industrial businesses do. Its interest coverage ratio of 678× basically means debt isn’t even a consideration. - High Returns on Capital
ROIC of nearly 48% is extremely rare. It means the company can reinvest profits into growth at incredibly high rates of return. - Attractive Dividends in US Dollars
For many investors, the icing on the cake is the company’s dividend yield of nearly 8%, paid in US dollars. That provides both income stability and a hedge against currency fluctuations.
The Cons (Yes, There Are Some)
Of course, no company is perfect. And FMS has some risks and drawbacks that need to be considered carefully:
- Valuation Looks Stretched
On the surface, a P/E of ~10 might look cheap, but when compared to some intrinsic valuation models, the stock does appear somewhat expensive. - Customer Concentration
A large portion of revenues depends on defense budgets and contracts, which can be unpredictable and tied to geopolitical shifts. - Raw Material Costs
Polyethylene and aramid are not immune to price volatility. If costs spike and can’t be passed onto customers, margins could compress. - Regulatory Complexity
As a supplier in the defense industry, FMS must navigate strict export controls and compliance requirements. Any issues here could disrupt business.
Long-Term Outlook
Despite these risks, the long-term story looks promising. With rising global defense spending—especially in the U.S., Europe, and Asia—demand for lightweight ballistic solutions is expected to grow.
FMS is well-positioned to capture a significant share of that demand thanks to:
- Its integrated manufacturing model
- Lean balance sheet
- Strong focus on R&D
- Consistent reinvestment strategy
If management continues to execute well, it’s not unreasonable to expect double-digit growth in free cash flow to continue over the coming years.
A Practical Example: Looking at Apple vs. FMS
To give you an idea of how useful the data can be when evaluating a company like FMS, let’s do a quick mental exercise.
Say you’re looking at a giant like Apple. You’ll find decades of cash flow data, valuation models like P/E and P/B, and forecasts built into analyst reports.
Now, imagine being able to pull a similar report for FMS Enterprises Migun—a much smaller company—showing cash flows since the early years, key ratios, and valuation estimates all in one place. That’s the type of deep historical and fundamental analysis that gives value investors an edge.
My Perspective as a Long-Term Investor
As someone who has followed and invested in FMS for years, here’s what stands out most to me:
- The business model is robust and not easily disrupted.
- Management has shown discipline in handling capital and keeping the balance sheet almost debt-free.
- The dividend yield, paid in US dollars, is a very attractive feature for long-term holders.
- Even if growth slows, the returns on invested capital and margin profile give the company plenty of room to keep compounding.
Again, none of this is a recommendation. It’s simply my personal interpretation of the company’s strengths and weaknesses.
Final Thoughts
FMS Enterprises Migun is not the kind of stock that makes headlines. It’s a quiet, niche manufacturer serving a critical role in global defense. But beneath the surface, it’s a high-margin compounder with a fortress balance sheet, unique competitive advantages, and a track record of turning cash into even more cash.
For value investors, those are the kinds of businesses worth studying. Whether it’s a “buy” or not depends entirely on one’s own valuation, risk appetite, and portfolio strategy.
At the very least, FMS is a reminder that sometimes, the best opportunities are hidden in plain sight, far away from the spotlight of Wall Street.