Credit Suisse Upgrades CACI On Revenue Growth Potential

CACI International Inc CACI seems poised to achieve sustainable organic revenue growth, given its trailing 12-month book to bill ratio and efforts to align itself more closely with high-priority customer mission areas, according to Credit Suisse.

The Analyst

Credit Suisse’s Robert Spingarn upgraded CACI from Neutral to Outperform, while raising the price target from $223 to $269.

The Thesis

CACI's organic revenue growth could accelerate to the mid-single-digit range after the first quarter of fiscal 2020, Spingarn said in a note. He added that the company may achieve faster revenue growth along with sustainable EBITDA margin expansion.

CACI may be able to generate EBITDA margins similar to its large cap competitors in fiscal 2020, and may even surpass them in fiscal 2021, the analyst mentioned.

Despite this potential, the stock is trading at a discount of around 34% to peers. Spingarn said there is upside to the current consensus estimates, given the company’s M&A focused capital deployment strategy and deal capacity of around $1.1 billion for fiscal 2020.

Spingarn further noted that the U.S. Department of Defense had awarded contracts worth $72 billion to small businesses in 2018, “a trend which has continued for many years and which naturally builds a pipeline of acquisition targets.”

Price Action

Shares of CACI climbed 1.2% to $211.73 at time of publishing on Tuesday.

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