Company name: CACI International
Entry Price: $240
Target Price: $270
Projected Yield: 12.50%
Time Line: 3 to 6 months
About CACI International
CACI is a multinational company based in the US that provides information technologies, engineering solutions, and simulation systems. It also creates products and solutions for public and civil institutions that have to do with national security, civil defense, intelligence, and healthcare.
What's the Idea?
Capitalize on the undervalued stock that may rise with an expanding portfolio of contracts and the acquisition of Ascent Vision Technologies.
Buy CACI International Shares >>
Why Trade CACI International?
Reason 1: Contract Portfolio Expansion
Despite the economic impact of the COVID-19 pandemic, CACI International was able to grow its contract portfolio in the first six months of 2020, with the national security sector being its priority.
In the Q2 2020, the company signed contracts worth $3.40 billion. As a result, the contract portfolio amounted to $21.60 billion, which is 28% more than last year. The company also expects to negotiate new contracts worth $13.70 billion over the next two quarters.
CACI International estimates its own market at over $230 billion, which means the company has a huge growth potential. It is important to note that CACI International mainly enters into long-term contracts with government agencies in the national security and civil defense sectors. Thanks to this, it is able to receive stable income in the long term (in particular, NGA TCS contract brings $1.50 billion over 10 years, DHS CBP BEAGLE, $1.10 billion over 5 years, and Army C5ISR, $465 million over 5 years).
Reason 2: Stable Financial Position and Positive Outlook
The current issues in the global economy did not impact the financial results of CACI International. In Q2, the company earnings rose by 15% YoY, which includes an 8% organic growth. Meanwhile, the adjusted EBITDA margin reached 10%, and the net income increased by 87%.
CACI also has a stable operating cash flow with a moderate leverage. The operating cash flow exceeded $500 million over the last 12 months, while the leverage ratio is 2.80x, even after the recent acquisition of Ascent Vision Technologies.
The CACI International management is optimistic about the future of the company. The outlook for 2021 indicates that CACI expects an organic growth of 5.50%, with net profit between $347M and $367M, which is 8% to 14% more than this year.
Reason 3: Ascent Vision Technologies Acquisition
In mid-August, CACI International acquired Ascent Vision Technologies for $350 million, the transaction being financed with loan funds. Ascent Vision Technologies focuses on electric optical and infrared imaging technologies and digital video processing systems using artificial intelligence and machine learning.
With this deal, CACI International got an opportunity to expand its market presence in multiple directions, including reconnaissance, surveillance, and drone production. In 2021, this may contribute to an increase in earnings by $50 million, and in adjusted EBITDA by $20 million.
Reason 4: Positive Recommendations by Large Investment Banks
Large banks are optimistic about the future of the company. The average target price projected by the investment banks for CACI International stock is at $294, the upside being 25%. Target prices given by Bank of America, Citigroup, and Wells Fargo & Co are at $300, $285, and $310, respectively.
How to Use the Investment Idea
- Buy CACI International shares at $240.
- Allocate no more than 3% to 4% of your midterm transaction budget.
- Sell the stock when the price is at $270 per share.
How to Buy CACI International Shares?
If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.
After opening an account, you can buy shares in either of the following ways:
Freedom24 Web Platform: In the Web Terminal section, type CACI.US (CACI International ticker in the NYSE) in the search box, and select CACI International Inc. (A) in the results. Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.
Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that shows up, type CACI.US (CACI International ticker in the NYSE) and select CACI International Inc. (A) in the search results. You will then see CACI International Inc. (A) stock in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of shares you want to buy and click Buy.
Buy CACI International Shares: Don't miss a profit opportunity with the company having signed large contracts!
Buy CACI International Shares >>
*Additional information is available upon request. Investment in securities and other financial instruments always involves risks of capital loss. The Client should make himself aware at his own accord, including to familiarize himself with Risk Disclosure Notice. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Commissions, fees or other charges can diminish financial returns. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and do not constitute an investment advice service. The recipient of this report must make their own independent decisions regarding any securities or financial instruments mentioned herein. Information has been obtained from sources believed to be reliable by Freedom Finance Cyprus Ltd or its affiliates and/or subsidiaries (collectively Freedom Finance). Freedom Finance do not warrant its completeness or accuracy except with respect to any disclosures relative to the Freedom Finance and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is indicative as of the close of market for the securities discussed, unless otherwise stated.