Tickers in this Article: ORB, BA, RTN, LMT
Space exploration is a tricky calculation for politicians. Although the long-term benefits are real, it can be difficult to justify the seemingly enormous price tags in the short term, particularly when there is no shortage of people willing to howl that those billions could be spent closer to home. This push-pull is in some ways a design feature for Orbital Sciences (NYSE:ORB). As one of the only companies out there devoted to space-based systems, Orbital would seem to offer a golden ticket to the U.S. government - the opportunity to continue to reap the benefits of space activity while also cutting costs and encouraging the private sector to take a larger role.

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From the Mundane to the Magnificent
Orbital Sciences has been at this quite a while, so long in fact that quite a few institutional investors have gotten bored with the name. That overlooks the fact that the company has actually accomplished quite a lot. This company not only sells missile defense target vehicles to the Department of Defense, but is also a viable player alongside The Boeing (NYSE:BA), Raytheon (NYSE:RTN), Lockheed Martin (NYSE:LMT) and Alliant Techsystems (NYSE:ATK) in areas like launch vehicles, satellites and space systems.

Launch vehicles like the Taurus and Minotaur have proven to be useful and viable alternatives that NASA, the military and private companies can use to put satellites in orbit. Although the Atlas rocket (built by Boeing and Lockheed Martin), EADS' Ariane, and the Zenit family from Ukrainian Yuzhnoye Design Bureau are all valid competitors, Orbital has built a relatively solid reputation for performance and cost with its customers. (For related reading, see Is That Airline Ready For Lift-Off?)

Several Irons In the Fire
With NASA under a mandate to expand the participation of the private sector in space exploration, Orbital Sciences has multiple shots on goal in the coming years. The company is developing the Taurus II and Cygnus with the intention of making it NASA's go-to resupply option for the International Space Station. Beyond that is an alphabet soup of other space and satellite projects like OCO-2, LDCM and GEMS that are underway and funded.

Not Without Its Mistakes
Exploiting space is hardly a sure thing at this point, and Orbital Sciences has had its share of failures. Three of the last four Taurus launches have failed and though NASA has expressed its ongoing support that cannot continue. Perhaps equally to the point, there's little that the company can do to finesse a launch failure - it's a big, obvious (sometimes spectacularly so) chunk of bad news.

Management has also had mixed success in its commercial satellite ventures. Years past, the company through its hat in the satellite phone ring, but ORBCOMM (Nasdaq:ORBC) was arguably every bit the failure that Iridium (Nasdaq:IRDM) and Globalstar (Nasdaq:GSAT) proved to be. Also long ago, the company spun off its imaging division into what is now publicly-traded GeoEye (Nasdaq:GEOY), and this company has had its ups and downs as well. It remains to be seen, then, if Orbital can build a business model that is not continually dependent on spending from the U.S. government or larger contractors like Boeing, Raytheon, and Lockheed.

The Bottom Line
Orbital Sciences has wisely steered clear of a big focus on manned flight projects - manned projects are incredibly expensive to develop and even riskier from a public relations standpoint, should something go wrong (satellites don't have families). What's more, with the U.S. federal budget likely to be under pressure for many years to come, Orbital could really make its bones if it can prove that its solutions offer viable, reliable and more cost-effective alternatives for NASA and the Department of Defense.

Orbital has had its ups and downs, but throughout the last decade the company has steadily grown its revenue base and its reputation. Even as the scale of its operations suggest a lower revenue growth rate in the future, improving profits and cash flow should make this a very interesting stock in the years to come. Although this is an unusually risky and specialized company, it does have the look of an undervalued growth opportunity. (For more, see Earning Forecasts: A Primer.)

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At the time of writing, Stephen D. Simpson did not own shares in any of the companies mentioned in this article.

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