Electro Rent Corp.’s stock may not look good to investors now, but the Van Nuys company could do better once federal budget cuts transform the aerospace and defense industries.

That’s because its customers will switch from buying test equipment to renting it. Sales have driven the company’s growth in recent years, but rentals are its core strength.

The company provides electronic testing and measuring equipment to defense contractors and tech companies. It was among the biggest losers on the LABJ Stock Index last week, falling 13 percent to close at $16.40 on April 4. (See page 20.)

David Gold, an analyst at New York’s Sidoti & Co., however, remains optimistic about the company’s prospects.

“As budgets weaken, we’re actually going to see a pickup in demand for rental, which is Electro Rent’s bread and butter,” Gold said. “But there’s always a lull as an industry switches from buying to renting and I think that’s what the company is experiencing.”

With the drawdown of combat forces from Iraq and Afghanistan, the Obama administration has proposed defense cuts that would amount to at least a 1.6 percent reduction in Pentagon spending in the next five years.

The company last week reported fiscal third quarter net income of $5 million compared with $5.08 million in the same period a year earlier. Revenue rose 1 percent to $60.1 million, with sales down nearly 8 percent. But rentals in the quarter were up 11 percent, and the company saw encouraging rental activity in March.

“Our customers are still in the throes of coming to grips with the new reality in defense and other federal agencies,” said Chief Executive Daniel Greenberg. “The nature of our business has not changed at all, but the nature of our customer needs is changing, in my judgment, very substantially.”

Electro Rent leases or rents its equipment primarily to companies operating in the aerospace, defense, telecommunications, electronics, and semiconductor industries. Renting appeals to customers who need the expensive equipment only periodically, such as troubleshooting a problem with a product prototype.

The company is considered the market leader in selling or renting such equipment, and also provides personal computers, workstations and servers to its test equipment clients.

Founded as a rental company in 1965, Electro Rent expanded into sales in 2009 with an exclusive U.S.-Canada deal with Hewlett-Packard spinoff Agilent Technologies Inc. The company also has a growing overseas business in China and Europe.

“That (Agilent) deal alone basically took the company’s sales business from zero to a $70 million annual run rate, and they’ve added to that with other deals,” Gold said. “It’s still a good growth business for the company, but the growth likely won’t be as great.”