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Science Applications (SAIC) Closes Halfaker and Associates Buyout

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Science Applications International Corporation (SAIC - Free Report) last Friday announced that it has completed the acquisition of Halfaker and Associates, LLC — a leading federal health technology solutions provider. Notably, the company had revealed on Jun 3 that it has entered into a definitive agreement to buy the federal health IT company for a total cash consideration of $250 million.

With the latest acquisition, Science Applications intends to ramp up its efforts to be the top IT modernization provider to the U.S. government. With the integration of Halfaker, Science Applications has added new capabilities and talent pool to its digital transformation portfolio. The combination will provide technology-rich solutions to federal agencies to aid their digital transformation journeys.

Rationale Behind Halfaker and Associates Acquisition

Halfaker is known for its ability to create, integrate, modernize and secure mission critical technology and systems for federal government to improve the health, security and well-being of American citizens.

The company offers advanced analytics, security and defense solutions, software engineering, program management, cyber security, and information technology solutions.  The U.S. Department of Defense, Department of Veterans Affairs, Department of Health and Human Services, the Centers for Medicare and Medicaid services are some of its major federal government customers.

Therefore, the acquisition would broaden Science Application’s product portfolio, thereby enabling it to cater to the wider digital transformation needs of the U.S. government. Additionally, existing partnerships with government agencies will further strengthen with this acquisition.

Furthermore, Science Applications projects the buyout to be accretive to its revenue growth rate, adjusted EPS, and free cash flow in fiscal 2022.

Long History of Successful Acquisitions

Science Applications’ shares have gained 17.7% over the past year compared with the Zacks Computer – IT Services industry’s increase of 53%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Science Applications has been aggressive on the acquisition front to boost its competitive position.

Notably, Leidos spun off Science Applications in 2013, post which the former retained most part of the intelligence business. As a result, Science Applications had been unable to maintain a competitive edge against peers.

However, the buyout of Scitor Holdings in 2015 put Science Applications as a market leader within the intelligence community, immediately boosting its top line, bringing in approximately $600-million additional revenues annually.

The acquisition of Engility in early 2019 also bolstered the company’s top line, profitability and cash flow, enhancing long-term shareholder-value creation.

In 2020, the company bought Unisys Federal, an operating division of Unisys Corporation (UIS - Free Report) . Unisys Federal’s expertise in providing solutions for infrastructure modernization, cloud migration, managed services, and enterprise IT-as-a-service to U.S. Federal agencies and the Department of Defense makes it a suitable choice for Science Applications.

Most recently, this April, Science Applications acquired Koverse that expanded its software portfolio into full-stack artificial intelligence. The buyout also enhanced the company’s capability to tackle the challenge of organizing structured and unstructured data from multiple sources.

Science Applications’ sustained focus on expanding product portfolio and driving growth through acquisitions makes us optimistic about the stock.

Zacks Rank & Stocks to Consider

Science Applications currently carries a Zacks Rank #3 (Hold).

Couple of better-ranked stocks in the broader technology sector are Zoom Video Communications (ZM - Free Report) and Digital Turbine (APPS - Free Report) , both sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Zoom and Digital Turbine is currently pegged at 15.6% and 50%, respectively.

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