Shares of technical services provider CACI International (CACI - Analyst Report) scaled a new 52-week high of $74.27 on the last day of the just-concluded year, before closing the trading session a notch lower at $73.22 for a healthy yearly return of 28.8%. CACI’s share prices have steadily been on the uptrend from Feb 2013.
Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock still has enough fundamentals that may further drive the stock upward. The stock is currently trading at a forward P/E of 12.5x and has long-term earnings growth expectation of 14.0%.
Strategic acquisitions, new business initiatives and operational excellence are the primary driving factors for CACI.
On Nov 15, 2013, CACI closed the $820 million acquisition of Six3 Systems, Inc. in cash, which is in one of the largest transactions of its kind in history. With approximately 1,600 employees and expected revenues of $470 million in 2013, the acquisition expands CACI’s addressable market by approximately $15 billion. Furthermore, Six3 Systems adds distinctive cyberspace, C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance), and intelligence capabilities to CACI solutions and services and augments its customer base. CACI expects the acquisition to be at least 5% and 10% accretive to GAAP and adjusted earnings, respectively, for calendar year 2014.
The company has a large pipeline of new projects and continues to win deals at regular intervals. These back-to-back contract wins are the key catalysts for the company. Furthermore, having the government as a big client lends stability to the business and moderates fluctuations in revenues.
In addition, CACI intends to drive operational excellence by intensively focusing on its organic and inorganic growth strategy and strengthening its existing customer relationships while building newer ones.
Over the last 7 days, the earnings estimates did not show any upward or downward revision for 2013. Although there is a lacuna of estimate revisions, we envision an uptrend for the stock backed by its strong growth potential.
Other Stocks to Consider
Other stocks worth considering in the industry include Franklin Covey Co. (FC - Snapshot Report), FTI Consulting, Inc. (FCN - Analyst Report) and Huron Consulting Group Inc. (HURN - Snapshot Report), each carrying a Zacks Rank #2 (Buy).