Monday, October 7, 2013

Seeking Alpha: CACI Fighting A Rising Tide

Sell-side support may help a stock, but it certainly isn't an absolute requirement for outperformance. Government IT services specialist CACI International (CACI) isn't well-liked by the Street (just one "Buy" rating against 10 "Holds" and three "Sell" ratings), but the shares have more than doubled the return of the S&P 500 over the past year and sit just 3% below their 52-week high.

Throughout the ups and downs of federal budget cycles, CACI has been remarkably consistent at generating free cash flow, and almost equally consistent in leveraging that cash flow (and debt) to acquire businesses and expand its revenue footprint. Certainly times are getting more challenging for the entire government IT sector, as sequestration, the debt ceiling, and now the government shutdown all loom over the business.

While childishness among U.S. political leaders and necessary cutbacks in government spending do threaten the near-term revenue and free cash flow of CACI, I believe the longer-term outlook is still positive on balance. It may be difficult for CACI to outperform against the optics of sub-1.0 book-to-bills, weaker orders, and lower revenue, but value-oriented investors may want to use the time to dig into this one more thoroughly, as even near a high the shares look undervalued on a long-term cash flow basis.

Please continue here:
CACI Fighting A Rising Tide

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