CSRA Is Different Than Other Government Service Provider Plays

Wells Fargo reiterated its Outperform rating on CSRA Inc (NYSE: CSRA), saying the company is "different than other government service providers."

"CSRA's primary (75–80 percent of revenue) focus on IT provides them unique positioning, and a significant headstart (in our view), as the client base increasingly turns its focus to cybersecurity, data analytics, mobility and cloud," Ed Caso wrote in a note.

The analyst said CSRA sees this as a 10-year opportunity given government's historic slow adoption rates.

Further, Caso noted that CEO Larry Prior feels content the growth rate will turn up, but did not pinpoint exactly when. He noted that the 2–3 percent three-year forward CAGR implied growth of 5 percent or better in the out periods.

Related Link: Mike Lawrie To Resign As CSRA Chairman

The company bets on building total backlog and a recent strong book-to-bill, which is expected to remain above 1x in FY17.

The analyst said Prior also expressed comfort in the company's positioning for the September 2017 re-compete of the largest contract Groundbreaker/Greenway. The addressable federal market indicated at about $100 billion for IT and about $100 billion for mission (operations) support.

Caso has a valuation range of $31–$33 on the stock, which closed Thursday's regular trading session at $24.61.