Butler National: Why Recent Results and Industry Trends Bolster the Bull Case
BUKS may be trading sideways, but aerospace M&A and a solid earnings release underscore the stock's likely future move to even higher altitudes.
Since my initial Value Never Sleeps writeup on Butler National (OTCMKTS:BUKS) last March, BUKS stock has not exactly reached new heights. In fact, BUKS stock has pulled back since publication of my writeup, falling from around $1.75 per share, to around $1.50 per share today.
This aerospace/casino holding company stock declined in line with the broad market during the early-April tariff meltdown, but unlike scores of other stocks, especially micro-cap stocks, instead of experiencing an epic rebound in prices, BUKS has instead stayed rangebound, anchoring around the $1.50 per share price point.
However, don’t view this is a sign that Butler, after an extended rally over the preceding twelve-month period, is on the verge of becoming a middling performer once again.
Taking a look at BUKS’ latest quarterly earnings release, as well as recent M&A-related developments in the aerospace industry, there may now be more indication that this stock will reach even higher altitudes in the future.
BUKS Stock: Recap
In case you didn’t read my last BUKS article, here’s a recap and the key takeaways:
Based in New Century, Kansas, just outside Kansas City, MO, Butler National is primarily in the aviation and aerospace business, through the ownership of several small companies in the space.
Alongside this, the company also owns and operates a casino in its home state (Boot Hill Casino in Dodge City, KS).
I first bought BUKS in 2016, due to its extremely-low valuation. Shares rallied in late-2010s, in large part due to price discovery, as key issues with the stock (complicated ownership structure for the casino, overpaid/entrenched management) persisted. I took profit due to these issues.
However, during the early 2020s, these past issues largely disappeared, as the company gained full ownership of Boot Hill’s physical real estate, and as prior management voluntarily retired/sold their personal positions in the company.
With new management at the helm, and as full “propco” and “opco” ownership of Boot Hill paid off thanks to sports betting legalization, BUKS stock experienced another wave of strong performance.
This latest bull wave has tempered, but I’ve taken the opportunity to dive back into shares, for three reasons.
Reason 1: despite yet another run-up in price, BUKS remains undervalued, when comparing the value of both its aerospace and casino businesses against peers.
Reason 2: While management is moving slower than desired, the C-suite appears focused on “finishing the job” when it comes to unlocking value. Butler National appears poised to ultimately sell or spin-off its casino.
Reason 3: Butler’s aerospace business has experienced a growth resurgence, and the overall sector has gotten hot again. Once it becomes a pure-play aerospace company, BUKS could re-rate, and there may be further upside as well from BUKS either acquiring other aerospace companies, or becoming an acquisition target itself.
Recent Developments
Earnings
On July 3, Butler National released results for the company’s fiscal year ending April 30, 2025. For the full year, BUKS reported just under $84 million in revenue, up 7.1% from FY2023. Revenue growth was entirely due to Butler’s Aerospace Products unit.
During the fiscal year, Aerospace experienced 15% revenue growth, due largely to strong performance with the unit’s Avcon aircraft modification and Butler-Temple divisions. What diluted the impact of Aerospace’s growth relative to overall performance was the slight revenue decline reported for the Professional Services unit. This unit, which encompasses Butler’s gaming assets, reported annual revenue of $38.3 million, versus $38.6 million during FY24.
Operating income increased by 27% year-over-year, from $13.2 million to $16.8 million. Again, this was primarily due to the strong performance of the Aerospace unit. Net earnings of $12.6 million/19 cents were basically at levels reported for FY2023 ($12.5 million, 18 cents per share).
However, it should be noted that FY2024 net income was skewed by a higher amount of realized gains on asset sales ($5.7 million vs. $1.6 million), mostly due to the sale of some corporate aircraft last fiscal year. Over the past year, Butler National’s contract backlog has increased by nearly 11%, from $30.3 million to $33.6 million.
Management Changes
Since my initial BUKS write-up, Butler National has also experienced two key changes in management. Back in May, the company reported the appointment of a new CFO, Adam Sefchick, as well as an announced “personnel reorganization.” This latter management change is definitely the most interesting of the two.
As the press release put it, “Butler National is eliminating the sales team within the public reporting parent company and moving certain impacted staff to the relevant subsidiary divisions they service. As a result, the company has eliminated the position of BNC Vice President & Director of Sales. Aric Peters’ last day with the company was May 1, 2025.”
On the surface, this reorganization has been done to improve efficiency/profitability, but there may be another motive. While not for certain, this change could also represent yet another step towards the separation of the gaming business from the core aerospace business.
BUKS Stock Valuation
With the latest financials now in hand, we can take another look at the underlying value of Butler National. As before, we will value each segment separately, to determine a “sum of the parts valuation” for BUKS.
Fortunately, unlike last time, we have a clearer and more straightforward means to determine segment-level EBITDA, as seen from this screenshot from the recently-released 10-K filing:
Gaming
During FY2025, Butler’s gaming division generated $38.2 million in revenue, and operating income of $9.1 million. Add back $3.2 million in depreciation/amortization, and $1.8 million in interest expense, and estimated EBITDA for this segment comes to around $14.1 million.
As discussed in my last write-up, given that Butler both operates the Boot Hill casino, as well as owns the physical real estate, it is reasonable to give the property a “blended” valuation that takes this “opco” and “propco” ownership into account. Previously, I used a 10x EBITDA multiple, in line with “opco”/”propco” deals in recent years. This values the casino business at around $141 million.
Aerospace
Add up segment-level results for Butler’s aircraft modification, avionics, and special mission electronics businesses, as well as $1.5 million in unallocated corporate expenses (considered to be more directly related to the aerospace segment), and one gets around $7.7 million in operating income for the segment. Adding back depreciation, amortization, and interest expense, and estimated EBITDA for the Aerospace unit comes to around $11.6 million.
Other micro-cap/small cap aerospace stocks have been on a tear lately, so their respective valuations have climbed since my last BUKS article. For instance, names like Optex Systems Holdings (NASDAQ:OPXS) and Innovative Solutions and Support (NASDAQ:ISSC) are trading at double-digit EBITDA multiples right now.
Both companies are experiencing far greater levels of growth right now, justifying the richer valuations. That said, BUKS, with its aviation business growing 15% last year, isn’t exactly a slouch in this area. At the very least, to a strategic acquirer, the valuation we placed on this business (9x EBITDA) in the initial write-up may perhaps be more reasonable than it was before, especially given the recent M&A wave in aerospace (more below).
Hence, at a 9x multiple, Butler’s core business could be worth just under $105 million.
Putting it All Together
With $141 million for the casino, and $105 million for the Aerospace unit, we get a gross valuation of around $246 million for Butler’s operating assets. Add to this $25.2 million in cash, and the total gross value for BUKS comes to $271.2 million.
Subtract around $35.1 million in long-term debt, and our net valuation for BUKS comes out to $236.1 million, or just over $3.50 per share, more than double Butler National’s current trading price.
Admittedly, bridging this valuation isn’t likely to happen overnight, much like how other developments that have helped to maximize the value of BUKS have taken time to take shape. However, subsequent developments since publication of my initial write-up bolster my confidence that a realization of full value, or close to it, will occur within a reasonable time frame.
The Possibly Not-So-Slow Road to Higher Prices
With the personnel change news, Butler National could be picking up the pace, when it comes to its transformation from a strange holding company, to a clear-cut pure-play aerospace and aviation stock. Yes, much of this may hinge on the ability to sell/spin-off the Boot Hill casino.
As you may already know, inflation and other macro factors are finally having an impact on the gaming industry. Business is slowing down in resort destinations like the Las Vegas strip, and even regional casinos in certain areas are feeling the squeeze. In the case of Boot Hill, where revenue declined slightly last fiscal year, it’s clear that Kansas is one of the struggling regional casino markets.
In turn, this may make it difficult for the company to divest Boot Hill, at least at the aforementioned valuation. However, in the next year or two, as interest rates move lower, and current macro headwinds normalize, M&A in gaming could pick up again, and regional operators may see opportunity in adding this property to their portfolio.
Then again, perhaps it may be better for Butler to take a lower price for Boot Hill, in order to speed up the aerospace pure-play transformation. At 10x EBITDA, there may be few takers, but at say, 7-8x EBITDA, perhaps a large regional operator like Boyd Gaming (NYSE:BYD) or Bally’s (NYSE:BALY) may be interested in acquiring the property at a discounted price.
Although selling at a lower multiple would undoubtedly bring down our valuation, from $3.50 per share to between $2.75 and $3 per share, this may be worth it, if a move to such price levels occurs 2-3 years out, instead of maybe as much as 5 years out.
After jettisoning the casino, Butler could quickly experience a re-rating, maybe even to a valuation higher than my forecast, especially if the company decided to finally uplist from the OTC markets to a major exchange.
A faster-than-expected Boot Hill divestiture could also speed up a possible sale of the overall company. Many signs point to increased M&A activity right now in aerospace. While I don’t think a similar scenario will happen with BUKS, consider how much of a premium TransDigm (NYSE:TDG) paid to acquire Servotronics (NYSE:SVT). A strategic buyer may be willing to pay up for a casino-free Butler, given the likely substantial cost and growth synergies from making a bolt-on acquisition of this company.
The Takeaway
Based on recent fintwit chatter on BUKS, the micro-cap community is picking up the opportunity at hand with Butler National. That’s not to say that shares are soon going to hit higher price levels. It does, however, suggest that a mix of increased awareness of the value proposition at hand, coupled with the recent solid results, may be sufficient enough to keep shares rangebound for now.
Down the road, though, subsequent developments may lead to the next big “liftoff moment” for Butler National. Any sort of news related to a divestiture of the casino business will likely be received favorably, even if the company fails to secure top dollar for the property.
I remain long the stock, and am considering adding to my position.
DISCLOSURE: As of Publication, The author (Thomas Niel) held a position in BUKS.
DISCLAIMER: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation from BUKS or any other entity for writing this article. I have no business relationship with BUKS, or any other company referenced.This article is for informational purposes only, and should not be construed as investment advice. Please consult your financial advisor before making any investment decision. Please be aware of the risks associated with trading BUKS stock. Do your own due diligence, and caveat emptor.