$17.64
-0.24 (-1.34%)
SAIC, Inc. (SAI)
CAPS Rating:
The Company provides scientific, engineering, systems integration & technical services & solutions to all branches of the U.S. military, agencies of the U.S. Department of Defense, the intelligence community & the U.S. Department of Homeland Security etc.
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This high quality, capital light business with multiple levers for above average earnings growth over the next few years is simply to cheap at current prices. A combination of revenue growth (8%organic, 2-4% aquisitions), margin improvements (through a combination of addressing redundant costs, simplifying its organizational structure, mix shift to higher margin businesses,etc.), and prudent buybacks should drive cash earnings per share somewhere between 15%-20% over the next few years.
As a general rule of thumb I love companies like SAI (at the right price, of course) that operate under large long term contracts, creating considerable visability into future earnings. This is especially the case in uncertain environments like today's, where estimating future earnings can be a futile exercise at best.
With an appropriate multiple for a competitively entrenched business of this unique quality, SAI should trade for no less than 18-20x it 2010 EPS of $1.60, putting this businesses IV at no less than $30.