CACI International (CAI): Shaping Uncle Sam's information technology

Anyone who has ever been a technical contractor knows that working for federal government clients can be particularly demanding. When you get the hang of it, though, it's good steady work. On the IT side, there is an outfit in Arlington, Virginia that really knows the ropes. It ranks high on the list of leading defense contractors.

CACI International (NYSE: CAI) provides a wide range of information technology and communications solutions, primarily to U.S. government clients. Systems integration, network management, engineering, simulation, and information assurance services are offered in support of client communications, system security, data collection and analysis. The firm also provides market analysis software, debt management services and litigation support. CACI International employs about 10,500 people worldwide.

The firm pleased investors last week, when it reported fiscal Q4 EPS of 67 cents and revenues of $520.4 million. Analysts had been expecting 63 cents and $479.2 million. The CEO noted, "During the quarter, we won all of our major recompetes and won significant new business across the federal government." Management also guided FY08 EPS to $2.50-2.80 ($2.68 consensus) and FY08 revenues to $2.05-2.15 billion ($2.09B consensus). JP Morgan subsequently upgraded the shares from "underweight" to "overweight".

The stock popped on the news and then moved into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the shares with two "strong buys", two "buys", twelve "holds" and one "sell". The CAI P/E ratio (20.37), Price to Sales ratio (0.82), Price to Book ratio (1.94), Price to Cash Flow ratio (13.45) and Price to Free Cash Flow ratio (9.88) compare favorably with industry, sector and S&P 500 averages.

The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $42.04 and $62.02. A stop-loss of $44.75 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.