Key Points
Rocket Lab bought Motiv Space Systems for $60 million in May.
Motiv was estimated to be generating between $3 million and $27 million in annual revenue at the time.
In 2027, Motiv's robotic space arm will fly on a NASA technology demonstration mission.
It's been less than six months since space company Rocket Lab (NASDAQ: RKLB) bought space robotics start-up Motiv Space Systems. The acquisition is already paying off for Rocket Lab.
On Friday, Rocket Lab announced that Motiv -- now known as Rocket Lab Robotics -- will debut its new autonomous robotic arm on a NASA Fly Foundational Robots (FFR) technology demonstration mission in late 2027. Flying aboard a spacecraft in low earth orbit, the robot arm will move across a spacecraft in zero gravity and install a component, demonstrating its ability to manipulate objects and perform repairs and upgrades in space.
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A successful demonstration, says Rocket Lab, will open the door to "follow-on missions, from building orbital infrastructure to supporting deep-space exploration." It may also open the gate to a new revenue stream for Rocket Lab.
Image source: Rocket Lab.
Return on investment in robots
As tech demonstrations go, this should be an interesting one to watch. What interests me more as an investor is how quickly Rocket Lab may be turning its investment in buying Motiv into new robotics revenue for Rocket Lab.
Why? Rocket Lab paid $40 million in cash up front to acquire Motiv, plus a promise to pay up to $20 million more in stock based on how the acquisition works out -- so up to $60 million total. Even nearly six months after the acquisition, it's still not clear how big a business Motiv is, but estimates range from $3 million to $27 million. But here's the thing:
If Motiv is making even as little as $3 million per year, then Rocket Lab's $60 million purchase price works out to a price-to-sales ratio of 20x on the stock, which is less than half Rocket Lab's own price-to-sales ratio. And if Motiv is generating more than $3 million in revenue (all the way up to $27 million), the price Rocket Lab paid for it becomes correspondingly lower.
Any way you slice it, Rocket Lab got itself a steal of a deal (relative to Rocket Lab's own valuation) when it bought Motiv. And now we know that there's more revenue coming just over the horizon, once Rocket Lab gets Motiv's robotic arm launched on this upcoming NASA mission.
The upshot for investors
The real reward for Rocket Lab will come, of course, after the tech demonstration proves the robotic arm's use and Rocket Lab starts winning those follow-on missions.
But based on the price it paid for Motiv, even before that race begins, Rocket Lab's already a winner.
Rich Smith has positions in Rocket Lab. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.