On Thursday, Raymond (NS:RYMD) James analyst elevated the rating of CACI International (NYSE: CACI) from Market Perform to Outperform, assigning a price target of $475.00. The optimism is rooted in the belief that CACI's current valuation presents an attractive entry point for investors. Trading at a PEG ratio of 0.88 and an EV/EBITDA multiple of 13x, the company appears attractively valued relative to its growth prospects.
According to InvestingPro analysis, CACI's current market position shows signs of being undervalued, with multiple ProTips supporting this view. He notes that the company's approximately 10.4 times EBITDA multiple is trading at a significant discount compared to its historical sum-of-the-parts (SOTP) valuation, which accounts for CACI's technology and expertise business.
The analyst points out that CACI's shift towards a higher value technology offering, moving from a portfolio that was historically 80% expertise, has resulted in a favorable change in business mix. This strategic transition has contributed to an approximate 200 basis point increase in EBITDA margin over the past eight years. The company's recent performance supports this trajectory, with revenue growing at 13.2% and maintaining a healthy gross profit margin of 32.8%.
Furthermore, this shift has led to an acceleration in organic growth rates. For deeper insights into CACI's transformation and detailed financial metrics, InvestingPro subscribers can access the comprehensive Pro Research Report, which covers over 1,400 US stocks.
Raymond James analyst emphasizes the potential for a re-rating of CACI's multiple, which he believes is warranted by the positive developments in the company's fundamentals. He suggests that CACI's stock should be valued more in line with the higher multiples it received prior to the election, reflecting the enhanced value of its technology offerings.
The upgrade comes at a time when CACI's stock is perceived to be undervalued relative to its historical valuation metrics, including a 15% discount to its five-year average multiple. Gesuale's analysis indicates that the company's ongoing business mix shift and margin improvement could lead to a re-assessment of the stock's value by the market.
Investors in CACI International will be watching closely to see if the company's financial performance and strategic initiatives continue to support the analyst's thesis and the newly set price target of $475.00. With a strong current ratio of 1.75 and moderate debt levels, CACI maintains a solid financial foundation for future growth. InvestingPro subscribers can access additional insights through 8 more ProTips and extensive financial metrics that provide a comprehensive view of CACI's investment potential.
In other recent news, CACI International has seen significant developments. The company reported an 11% increase in Q1 revenue for fiscal year 2025, reaching nearly $2.1 billion, leading to an increase in its revenue guidance for FY 2025 to between $8.1 billion and $8.3 billion. CACI recently completed the acquisition of Azure Summit Technology for $1.275 billion, partially financed by a $750 million Term Loan B Facility.
On the analyst front, Barclays (LON:BARC) raised its price target for CACI to $625 based on a promising three-year forecast. Jefferies and TD Cowen also raised their price targets to $570, citing strong Q1 performance and significant awards. However, Goldman Sachs (NYSE:GS) downgraded the stock from Neutral to Sell and significantly reduced its price target to $373.
In contrast, Baird maintained an Outperform rating with a price target of $640.00, despite concerns over the DOGE initiative. Lastly, UBS began coverage on shares of CACI with a Buy rating and a price target of $557.00, citing the company's low Federal Civilian spending exposure and focus on technology.
CACI International also extended its Master Accounts Receivable Purchase Agreement for another year, indicating solid operational stability. The company has been awarded a five-year contract by the National Geospatial-Intelligence Agency to provide artificial intelligence and geospatial expertise, valued at up to $290 million.
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