The Three Stanley’s… I choose Stanley, Inc.
Who would have guessed that there are three public company’s that are Stanley’s. We have the most well known, Stanley Works (NYSE: SWK), Stanley Furniture (NASDAQ: STLY), and Stanley, Inc (NYSE: SXE).
Not to take anything away from the other Stanley’s (in fact, I’ve only cursorily looked at them), but the one I like the most is Stanley, Inc. I love the hometown companies, and as a government contractor, it is no surprise that Stanley (err Stanley, Inc.) is right in my backyard (Arlington). In short, the company provides systems integration, business processing outsourcing, and logistics, primarily for the US government.
The company recently reported earnings and boy did they hit it out of the park. Revenues were up 44% and the diluted EPS came in at $0.23, beating estimates of $0.23. The company has raised its guidance to $.90-$.95 per share for the fiscal year ending 03/2008. They also increased operating margin by 14% to 7.5%, a number I expect to continue to climb throughout the year. It is currently trading a 18X forward earnings, a number I find incredibly cheap for a company is growing its organic revenue by 34% on improving margins. The PEG ratio is almost laughably low within this sector.
Stanley Inc. has landed some impressive new contracts and continues to rake it in on its passport services business. The passport services contract is around 15% of revenues for the company. This summer I have seen the line at the downtown DC passport office grow and grow as people seek to meet new travel document requirements imposed by the government. This contract will continue to outperform in quarters 2-4. Be aware, however, that this contract ends in March 2008. The company expects the RFP for the passport contract recompete will be out soon and their reply will come 30-45 days later.
Stanley CEO noted that the company is in the midst of submitting 6 $100 million+ proposals for contracts with the US government, in addition to a variety of medium and smaller proposals. He also expressed confidence in the company, at least, meeting its new guidance, but I expect they will continue to outperform. Looking into this guidance, I expect them to land an additional $200+ million in contracts and speculate they will reland the passport gig.
Some speculation here, especially with the passport contract up, so I would hedge with some January 2008 puts if you are moving into a larger position.
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