SAIC, Inc. (SAI)

SAIC is a military and government contracting company that seems to have an extremely diversified and stable book of business. The company has been left behind by the recent rally and the stock is trading for just 0.36 times sales -- much less than its historical average which appears to be 0.8 times sales. The company has grown rapidly over the last ten years and typically generates returns on equity in excess of 20%. The company holds a 900 million cash warchest, which almost enough to offset its $1.1 billion debt balance. In short there is no balance sheet risk. To understand this company better, see excellent pitches by ACMIP, EARNINGS POWER and TMFPLATOISH.

war!

good stock

Ultimately the Federal deficit spending will have to come under control - impacting government contractors like SAIC. With the installation of a new CEO, an outsider from BAE - another large defense contractor, SAIC shows no indication of expanding the their target market. SAIC will be fighting for market share in a shrinking market.

Mmm...partnership with the government...

Top notch government contractor trading in lower part of its typical trading range in terms of P/FCF. This company is a solid cash flow generator that tends to spend its excess cash on share repurchases and strategic acquisitions. Reasonably astute acquirer, but you know how that goes.

SAIC is in all kinds of different business areas and has its hands in a huge number of ongoing government programs. It is one of the largest platform independent service providers to the government. In other words, it doesn't deliver big weapon systems or fighting platforms, rather it works on all of them and gets its cut of the pie, no matter who wins the hardware contract, in many instances.

It is strong in ISR and IT (cyber security), which are both areas that will see budget increases in an era where many large DOD systems will begin seeing cuts. It does have some exposure to the Future Combat Systems program that will be facing anticipated funding reductions, but should be able to make it up in other growth areas. This is probably the biggest of the class of government contractors I like to call "Beltway Bandits." That is a term of endearment and just refers to the fact that they are everywhere with bodies, facilities, and people ready to write reports, scooping up the logistics, support, maintenance, and training bucks.

I believe SAIC can grow sales at high single digit rates and earnings/cash flow at rates in the low-to-mid teens practically forever. It won't be a home run and multi-bagger over a short time frame, but it is a well run company in an industry dependent on relations. It will outperform the market over at least the medium term.

In 2008 Fellow fool ValueArbitrage made an interesting call here. Along with KipLargo's note on the increase in the type of software this company provides to the good ole boys in DOD. On the other hand I guess another way to look at it,is the wars and the need for spying will cease and we sputter out in peace? (BOOM! ) Oh well it was a nice thought anyway.

Great balance sheet, defensible niche, mgmt track record. SAIC represents a very solid value at these prices.

SAI is a capital light, consistently profitable, defensive business with a dominant competitive position, fortress-like balance sheet and solid long term growth prospects. It also happens to be significantly undervalued. Mgmt. has a long and distinguished paper trail, not to mention multiple levers at their disposal to build shareholder value over the next few years.

I think they can continue to grow sales, improve margins (through their various initiatives), sell off some hidden non-core assets (such as their real estate), or utilize their cash position to buyback stock, pay a dividend or reinvest for growth. This combination of internal operating improvements and value added capital allocation should lead to increasing operating and net margins as the company grows, which will eventually drive significant upside.

Investors who get in at or around today's price are likely to experience a double or more over the next 3-5 years. Outperform.

Gates is cutting back on Defense, but he's gonna cut back on hardware like Destroyers, F-22's, and the like. What he will increase is software, namely cyber protection and cyber spying. Gates is an old CIA guy, one of the few top level guys at that agency who wasn't a complete buffoon. He's smart and he's got great foresight and he won't be influenced by the old guard.

See also IACI. Government contracts are a boon.

For that matter, the stimulus $20B to NIH stands to benefit research-supporting companies: SIAL, CRL, CVD...

SAIC is a diversified IT company with core business in various industries: security, energy, health, and various govt agencies.

Government is getting bigger and SAIC is one of the big government players.

NOt onlydoes a lot of defense work, but has many contracts in Energy (especially Nuclear).

Outperform the broad index a little like a medical stock. Risk hedge.

Looking at the trend I think this stock will outperform the S&P, and if not immediately at least in three months from now.

ibd

SAIC has been getting multiple multi-million contracts lately. I think, we should give it a thumbs up!