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As is the case in the corporate world, government agencies have "go to" consultants. So far as the U.S. defense community is concerned, there is an outfit in San Diego that is on the list.
SAIC, Inc. (NYSE: SAI) provides scientific, engineering, systems integration and technical services to all branches of the U.S. military, agencies of the Department of Defense, the intelligence community, the U.S. Department of Homeland Security and other U.S. Government civil agencies. The firm also offers technology-driven consulting services to the oil & gas, utility and pharmaceutical industries. SAIC employs more than 44,000 people, in over 150 cities worldwide. Lockheed Martin (NYSE: LMT) is a major competitor.
The firm pleased investors last week, when it reported Q2 EPS of 24 cents and revenues of $2.2 billion. Street analysts had been looking for 21 cents and $2.17 billion. Management also guided FY08 EPS to 83-88 cents (85 cent consensus) and FY08 revenues to $8.7-$9.0 billion ($8.79B consensus).
SAI shares popped on the news and are now forming 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 stock with one "strong buy," 12 "holds" and one "sell." Analysts expect a 13% growth rate through the next year. The SAI P/E ratio (4.10), Price to Sales ratio (0.25), Price to Book ratio (1.23), Price to Cash Flow ratio (4.86) and Price to Free Cash Flow ratio (4.92) compare favorably with industry, sector and S&P 500 averages. Institutions own about 80% of the outstanding shares. Over the past 52 weeks, the stock has traded between $16.11 and $21.10. A stop-loss of $16.00 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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